TSMC defies chip downturn with record Q4; cuts 2023 capex as demand weakens

TAIPEI - Taiwanese chipmaker TSMC reported a forecast-beating 78 per cent rise in quarterly profit on Thursday, as strong sales of advanced chips helped it defy a broader industry downturn that battered cheaper commodity chips.

Taiwan Semiconductor Manufacturing Co, the world’s largest contract chipmaker, is a rare bright spot in the global tech industry which is grappling with worsening consumer demand brought about by decades-high inflation rates, rising interest rates and economic downturn.

Rival Samsung Electronics’ quarterly profit tumbled two-thirds to an eight-year low, with the South Korean firm blaming a weakening global economy which hammered memory chip prices and curbed demand for electronic devices.

TSMC’s dominance in making some of the most advanced chips for high-end customers such as Apple has shielded it from downturn. Still, it cut its 2023 capital expenditure plan on Thursday, underscoring worsening demand outlook.

The chipmaker now expects to spend US$32 billion (S$42/6 billion) to US$36 billion, versus US$36.3 billion in 2022, and sees first-quarter revenue in a range of US$16.7 billion to US$17.5 billion, compared with US$17.57 billion a year earlier.

“We have confidence in the second half the business would rebound,” boosted by product launches including for technology such as artificial intelligence, CEO C.C. Wei said on Thursday.

“We expect the whole industry to drop slightly but TSMC to grow slightly” in 2023, he said.

TSMC, Asia’s most-valuable listed firm and backed by billionaire Warren Buffett’s investment conglomerate Berkshire Hathaway, has repeatedly said business would continue to benefit from a “mega-trend” of demand for high-performance computing chips for 5G networks and data centres, as well as increased use of chips in gadgets and vehicles.

It reiterated on Thursday slower demand was a cyclical issue and 2023 overall would be a slight growth year for the company.

For October-December, TSMC booked record net profit of NT$295.9 billion (S$12.9 billion) from NT$166.2 billion a year earlier.

Revenue climbed 26.7 per cent to US$19.93 billion, versus TSMC’s prior estimated range of US$19.9 billion to US$20.7 billion.

The fourth quarter “was dampened by end-market demand softness and customers’ inventory adjustment,” vice president and chief financial officer Wendell Huang told a briefing. Such conditions will carry into the first quarter, Mr Huang said.

TSMC’s share price fell 27.1 per cent in 2022, but is up 8.5 per cent so far this year giving the firm a market value of US$412.78 billion. The stock rose 0.4 per cent on Thursday versus a 0.1 per cent fall for the benchmark index. REUTERS