Taiwanese contract chipmaker TSMC said last quarter that weak demand for its PC and smartphone products is forcing it to cut its capital expenditure by 10% to $36 billion in 2022 current year will not exceed 32 billion US dollars in a pessimistic scenario.
As Bloomberg notes, citing official statements from company officials, the company plans first-quarter profit from $16.7 billion to $17.5 billion, which is less than what analysts had predicted – $17.9 billion, and also less than sales in the same period last year – $ 17. 6 billion. Last year, capital expenditures did not exceed $36.3 billion, and this year they should be in the range of $32-36 billion.
Sales in the first quarter of this year could fall for the first time in four years. In the first half of the year, sales will fall by 5% to 9%, however the company expects demand to pick up in the second half of the year, which may overall make for a positive sales trend for the full year overall. The revival of the market should be associated with the release of new products, including artificial intelligence system solutions, according to TSMC CEO CC Wei. Even if the entire semiconductor industry slightly reduces sales this year, TSMC believes it will be able to increase it.
According to analysts at Cathay Securities and Futures, a more than 10% increase in TSMC’s investments this year could bode well for stock market investors, but if we’re going to rely on company management’s own statements, we’re talking more about capex spending to reduce than to maintain them at current levels. In the long term, according to TSMC’s forecast, the demand for electronic components will grow.
TSMC’s net income rose 78% year over year to $9.7 billion in the fourth quarter, beating analysts’ expectations, but sequential growth was capped at 5.4%. Year-over-year revenue in dollar terms rose 26.7% to $19.93 billion, disappointing investors for the first time in two years while down 1.5% from the third quarter. According to CFO Wendell Huang (Wendell Huang), in the fourth quarter, there was weak demand for TSMC services from customers, they also faced the need to free warehouses from the accumulated products. In the first quarter, such conditions will continue, according to a TSMC representative.
Amid the challenging fourth quarter conditions, TSMC was able to increase its profit margin to 62.2% year-on-year from 52.7%. In addition to favorable currency movements, this was also helped by TSMC’s cost-cutting efforts. According to TSMC, the yield in the current quarter should fall to 53.5% in the most pessimistic scenario. Over the past year, the company’s stock has fallen 27% but has gained 8.5% since the start of the current year.
Approximately 55% of fourth quarter sales were driven by engineering processes with standards thinner than 7nm. The 7nm process family accounted for just 22% of revenue, while the 5nm process and related lithographic standards accounted for 32% of TSMC’s total revenue in the fourth quarter. In the third quarter, the share of 5nm process technology was lower while the share of 7nm process technology was higher. At that time, TSMC first spoke of a drop in demand for 7nm products, which forced the company to reduce capital expenditures by $4 billion for the whole of 2022.
In general, the company ended 2022 with a revenue share from sales of 7nm products of no more than 27%, while this figure reached 31% in 2021. The share of 5nm process technology in TSMC’s sales increased from 19% to 26% last year. While the third-most-demanded 16nm process technology holds a stable share of 13-14%, the revenue share from sales of 28nm chips increased from 10% to 11% last year.
Looking at the sources of revenue by market segment, the share of components for high performance computing (HPC) was 42% in the fourth quarter, the smartphone segment was content with 38%. In monetary terms, the HPC market showed a steady 10% increase in revenue while the smartphone segment fell 4% while the automotive segment grew 10%. Last year was a good year overall for TSMC, with revenue increases of 59% in HPC, 28% in smartphones, 47% in Internet of Things, and 74% in automotive. The consumer electronics division was up just 1% at the end of the year, while all other divisions increased sales by 51%. For the full year, the HPC segment brought 41% of revenue to TSMC, while the smartphone segment lagged slightly at 39%.
Geographically, TSMC has increased its dependence on the North American market over the past year (from 65% to 68% of sales), while the Chinese market has only increased its position from 10% to 11%, but still ranks second with the rest of the world Asia Pacific Region.