Taiwan Semiconductor Manufacturing Co. (TSMC) has cut its capital expenditure budget to US$36 billion for this year, the world’s largest contract chipmaker said on Thursday, citing market uncertainty in the short term.
TSMC’s capex will be lowered from the company’s previous estimate of the lower end of a range between US$40 billion and US$44 billion.
In an investor conference where the chipmaker detailed its third-quarter results and gave guidance for the fourth quarter, TSMC’s Chief Financial Officer Wendell Huang (黃仁昭) said the decision to lower the 2022 capex was made to adjust to market changes.
The global semiconductor industry is undergoing inventory adjustments at a time when the major central banks have raised key interest rates to fight fast-growing inflation, which has hurt demand.
Spending plans
Huang said TSMC would allocate 70-80 percent of its 2022 capex to the development of advanced technologies, and 10 percent to the development of sophisticated packaging and testing services as well as photomask products.
Huang added that specialty processes, such as microelectromechanical systems (MEMS), embedded flash (eFlash), and CMOS (complementary metal oxide semiconductor) image sensors, or CIS, would make up 10-20 percent of the capex.
While he did not give any comments on the 2023 capex, Huang said TSMC would review its capex plan from time to time to see whether any change has to be made, and will work closely with its clients.
In the first nine months of this year, TSMC’s capex totaled about US$25.47 billion, up 18.02 percent from a year earlier.
In the third quarter alone, its capex reached US$8.75 billion, up 19.2 percent from the second quarter and also up 29.2 percent from a year earlier.
Q3 results
During the July-September period, TSMC posted NT$280.87 billion (US$8.80 billion) in net profits, rising 18.5 percent from a year earlier and soaring 79.7 percent from a year earlier, with earnings per share at NT$10.83, as the company benefited from a weakening Taiwan dollar.
The 5-nanometer process is the latest technology that TSMC has launched mass production in, and TSMC CEO C.C. Wei (魏哲家) said at the investor conference that the more advanced 3nm process was scheduled to begin commercial production in the fourth quarter of this year.
According to Wei, the development of the 3nm process has been on schedule with a satisfactory yield rate and on the back of solid demand for high-performance computing devices and smartphones, shipments of chips made using the technology will be stable in 2023 and are expected to account for 4-6 percent of its sales next year.
Wei said an upgraded version of the 3nm process — 3nm enhanced (N3E) — is scheduled to start commercial production in the second half of next year.
TSMC’s 3nm family uses FinField-effect-transistor (FinFET) technology, a 3D transistor structure that allows a chip to run faster using the same amount of power or to run at the same speed on reduced power.
Regarding the 6nm and 7nm processes, weakening demand for smartphones and PCs and a delay of new product launches by clients mean that capacity utilization of the two processes is expected to start to slow in the fourth quarter of this year and the weakness is expected to continue into the first half of next year, said Wei.
New wafer fab projects
TSMC’s new wafer fab projects in the U.S., Japan, Nanjing, and Kaohsiung have been proceeding on schedule, Wei said while adding that as its expansion continues, the company did not rule out the possibility of building a new plant in Europe.
In Kaohsiung, TSMC will build two fabs — one for the 7nm process and the other for the 28nm process. Due to a slower demand for the 7nm process, Wei said, the plan for the 7nm fab in the city will be adjusted slightly.
Meanwhile, Huang confirmed a media report which said that TSMC had secured a one-year license to continue ordering American chipmaking equipment for its plant located in Nanjing in China, after the United States had recently expanded a ban on IC and related equipment exports to the Chinese market amid an escalating tech war between Washington and Beijing.
The Nanjing plant specializes in mature 16nm and 28nm processes, and as the latest export ban from the U.S. focuses on advanced chips used in artificial intelligence and supercomputers, the impact on TSMC will be limited and controllable, said Huang.
He added that TSMC would abide by laws to serve its clients.
Q4 outlook
As for the company’s outlook for the fourth quarter, Huang said, the Taiwan dollar’s weakness is expected to help TSMC offset the impact from the slow season, which will lead to lower capacity utilization.
Huang said TSMC’s consolidated sales for the October-December period was expected to range between US$19.9 billion and US$20.7 billion, and the median figure will rise by 0.4 percent from the third quarter.
The chipmaker’s gross margin — the difference between revenue and the cost of goods sold — is expected to range between 59.5 percent and 61.5 percent in the fourth quarter, compared with 60.4 percent in the third quarter.
In U.S. dollar terms, TSMC’s sales are expected to grow by 34-36 percent from a year earlier in 2022, and growth over the next few years is expected to hit 15-20 percent.
Despite the recent losses suffered by TSMC shares, Huang said the company did not have a share buyback program in place to bolster the share price.
TSMC shares closed down 0.63 percent at NT$395.00, the lowest level since July 24, 2020, when the closing price was NT$386.00.
Source: Focus Taiwan News Channel