Part of the cut is due to a decrease in demand after the demand peaks that began in 2020 and partly from a shortage of chip manufacturing machines
TSMC is cutting its 2022 capacity expansion budget to $36 billion, 10 percent from the original $40 billion it announced in July, as the outlook for demand from smartphone and other consumer electronics makers dims.
The world’s leading maker of advanced chips for Apple iPhones and other smartphones says demand for its flagship 7nm chips has slumped, affecting the utilization rate of that node. The company did not offer numbers on the utilization rate – a key measure of profitability.
“While the ongoing semiconductor inventory correction will impact our utilization rate in the first half of 2023, we expect our business to be supported by stronger demand for our distinctive, leading and advanced specialty technologies beginning in the second half of 2023,” CEO CC Wei said during a call with investors following The publication of the financial statements about two weeks ago.
Wei said 2023 will be a growth year for TSMC, even though the overall semiconductor industry will shrink. He refused to give details. Utilization of TSMC’s 7nm and 6nm nodes will decline in the first half of 2023 from the past three years, he added.
The slowdown comes after the strong growth that began in 2020, when the corona epidemic drove demand for the expansion of data centers and mobile electronic devices as part of the work-from-home trend. The semiconductor shortage has widely affected system manufacturers, including auto and defense companies.
Half of TSMC’s capital spending cut in Capex is the result of a shortage of chipmaking machinery from suppliers like ASML, who ironically couldn’t buy enough chips to make their own equipment. TSMC, which led the world with its latest 5nm chips, plans to produce its first 3nm chips within months. Samsung, TSMC’s second rival in the chip foundry business, became the first to announce 3nm chip production this year. Demand for 3nm chips will contribute low single-digit percentages to the company’s revenue through the second half of 2023, TSMC said.
The main impact of the inventory correction on TSMC will come during the first half of 2023, CEO Wei said.
TSMC said it is in preliminary evaluation of setting up a chip factory in Europe. Following the US announcement of new restrictions on the export of chips and related technology to China, TSMC has confirmed that it has received approval to manufacture 16nm chips at the company’s facility in Nanjing, China.