Taiwan Semiconductor Manufacturing Co.
(TSMC) has issued a weaker-than-expected
revenue forecast for the current quarter, as
demand for smartphones and server chips
continues to slump. The company, which is
Apple Inc.'s main chipmaker, is warning that
demand from the mobile and PC industries is
likely to remain soft for now. Despite this,
TSMC is sticking to its earlier plans to spend
up to $36bn on upgrading and expanding
capacity in 2023. The mixed outlook reflects
the uncertainty that TSMC and the industry as
a whole are facing regarding electronics
demand in 2023 and beyond. Consumers and
corporations are tightening their budgets due
to soaring inflation and the potential for a
global recession.
TSMC is projecting sales of $15.2bn to $16bn
this quarter, just below the $16.1bn average
projection of analysts. The company is
projecting gross margins of 52% to 54%, which
is generally in line with the 52.5% average
estimate. TSMC's CEO, C. C. Wei, told analysts
that the company is currently passing through
the bottom of its business cycle in the second
quarter. However, the PC and smartphone
markets "continue to be soft at the present
time."
One of the big questions that TSMC and its
peers are facing is the extent of the global tech
slump and whether China's economy will
bounce back strongly after dropping Covid
Zero controls. TSMC is expecting a low- to
mid-single-digit revenue decline in 2023,
which is in line with estimates.
Despite the uncertainty, investors remain
hopeful that TSMC's leading technology can
drive growth, particularly in the surge in
artificial intelligence development and
applications. This power demand for high-end
computing chips and datacenters required for
training and hosting AI models. The boom in
development since OpenAI's ChatGPT
demonstrated the technology's potential is
driving sales of high-end chips, which is in
turn helping to reduce the enormous stocks of
chips that customers have held since the Covid
era. The buildup in inventory had been larger
than expected coming out of late 2022,
according to TSMC executives.
TSMC's market leadership has likely helped to
buoy its margins. On Wednesday, fellow
industry bellwether ASML Holding NV, the
largest producer of equipment essential to
advanced chipmaking, forecast better-than-
anticipated June quarter revenue. However,
net bookings, a barometer for future growth,
plunged 46% from a year earlier. Another
equipment supplier to TSMC, Lam Research
Corp., also forecast adjusted earnings per
share that missed the average analyst estimate.
In the longer term, TSMC's leading technology
may be able to galvanize growth, particularly
as the demand for high-end computing chips
and datacenters required for AI models
continues to rise. The company's ramp-up in 3-
nanometer node production, AI, and server-
related high-performance-chip (HPC)
fabrication orders will be key areas of focus in
the 1Q conference call following a
disappointing 15.4% decline in March sales.
These factors will determine whether the
company can maintain revenue-growth
momentum in 2023, as consensus suggests,
and counter a semiconductor-sector outlook
clouded by weaker-than-anticipated
smartphone and PC demand, along with
stagnant inventory-reduction progress.
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