UPDATED 13:23 EST / OCTOBER 13 2022

INFRA

TSMC lowers 2022 capital spending target to $36B

Taiwan Semiconductor Manufacturing Co. Ltd., the world’s largest contract chipmaker, today lowered its capital spending target for 2022.

Chipmakers’ capital spending encompasses expenses such as new manufacturing facilities and purchases of processor fabrication equipment. TSMC set a capital spending target of $40 billion three months ago. The company today lowered that target by 10%, to approximately $36 billion.

The move comes after Micron Technology Inc,. one of the leading makers of RAM and flash memory chips, also announced plans to scale back capital spending. Micron last month reduced its capital spending target for 2023 to $8 billion, which represents a 30% decline from 2022. The company expects to lower spending on chip wafer production equipment by 50%.

Intel Corp., meanwhile, is reportedly preparing to lay off as many as thousands of employees amid slowing demand for personal computers. International Data Corp. estimates that PC shipments declined 15% year-over-year, to 74.25 million units, in the third quarter. The new restrictions that the U.S. recently placed on chip technology exports to China are also expected to affect the sales of some processors.

TSMC lowered its capital expenditure target for 2022 today in conjunction with the release of its third-quarter earnings report. The company disclosed revenue of NT$613.14 billion, or about $19.2 billion, which represents a 48% jump from the same time a year ago. 

The smartphone market accounted for 41% of TSMC’s third-quarter revenue. The company manufactures the chips that power Apple Inc.’s iPhones and also makes mobile processors for Qualcomm Inc., a key supplier to the Android ecosystem. TSMC reported that revenue from smartphone-related products grew 25% year-over-year in the third quarter.

Besides mobile processors, TSMC also makes other products, including data center chips. TSMC’s high-performance computing business, which focuses on the data center market, accounted for 39% of its total revenues during the third quarter.

TSMC generated a net profit of NT$280.9 billion or $8.8 billion in the quarter, 80% more than a year earlier. The company attributed the profit jump primarily to increased demand for chips made using its most advanced semiconductor manufacturing technologies. Those chips include the A16 Bionic chip in Apple’s latest iPhones, which is based on five-nanometer technology.

The company today also released its fourth-quarter sales forecast. For the three months ending Dec. 31, it’s projecting revenue of $19.9 billion to $20.7 billion.

TSMC reportedly expects that some of its manufacturing capacity “won’t be fully used” during the quarter. However, the company believes that there will be consistent demand for chips in areas such as the auto sector and the high-performance computing market.

In August, it announced plans to start producing processors using its newest three-nanometer manufacturing process within weeks. The three-nanometer process is expected to provide up to 15% higher performance than TSMC’s five-nanometer manufacturing technology. Additionally, it will enable companies to make chips that use up to 30% less electricity than current-generation products.

Apple and Intel Corp. will reportedly be among the first users of the three-nanometer process. It’s believed that Apple will use the process to produce iPad chips, while Intel is expected to make notebook and data center processors.

Image: Unsplash

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