TSMC Slashes Capital Spending By 18% Citing Plunging Global Demand For Its 7-nanometer Chips Used In Smartphones And PCs

by Swarajya Staff - Oct 14, 2022 01:57 PM +05:30 IST
TSMC Slashes Capital Spending By 18% Citing Plunging Global Demand For Its 7-nanometer Chips Used In Smartphones And PCs

Taiwan Semiconductor Manufacturing Co, the world's largest contract chip maker, on Thursday (Oct 13) slashed its proposed capital expenditure by up to 18 per cent for this year as tepid demand for smartphones and PCs curtailed demand for its 7-nanometer chips and lowered capacity utilization.

In July, TSMC announced that it would be spending between $40 billion and $44 billion this year on new fab facilities and equipment. But it has now downscaled the spending plan to $36 billion.

In April 2021, TSMC, the world's largest contract chip maker, announced plans to invest $100 billion over the next three years to increase production capacity to meet surging demand.

"Our third quarter business was supported by strong demand for our industry-leading 5nm technologies," said Wendell Huang, VP and Chief Financial Officer of TSMC.

"Moving into fourth quarter 2022, we expect our business to be flattish, as the end market demand weakens, and customers' ongoing inventory adjustment is balanced by continued ramp-up for our industry-leading 5nm technologies." he added.

The company's third-quarter revenue was $20.23 billion, an increase of 35.9% year-over-year and 11.4% from the previous quarter. In the third quarter, shipments of 5-nanometer accounted for 28% of total wafer revenue; 7-nanometer accounted for 26%. Advanced technologies, defined as 7-nanometer and more advanced technologies, accounted for 54% of total wafer revenue.

Most of TSMC's 7-nanometer and 6-nanometer chips are used in smartphones and computers, the company CEO C.C. Wei said, adding that customers are pushing back new product schedules, causing a slide in demand. "Probably in 2023, the semiconductor industry will likely decline, but TSMC also is not immune," Wei said. "Our business will be more resilient than the overall semi industry."

Responding to concerns raised by the investors regarding the U.S s latest semiconductor export restrictions to China, Wei said, "the new regulation sets the control threshold at a very high-end specification, which is primarily used for artificial intelligence, or supercomputing applications.

Based on the current business outlook, the chip maker's leadership expects the overall performance for the fourth quarter of 2022 to be between US$19.9 billion and US$20.7 billion.

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