Taiwan Semiconductor Manufacturing Co. is said to have snipped its capital spending target for 2022 by about 10%. This means that the semiconductor industry may be in a rough patch as TSMC responds to slowing global chip demand.
The company confirms that it expects to spend approximately $36 billion on capital equipment in 2022, a significant decline from at least $40 billion previously. This information comes from a third-quarter TSMC report that was just released on Thursday, Oct. 13.
TSMC Spending Reductions
According to TSMC executives, the spending reduction was the result of modifying its plans to increase capacity due to factors like a decline in the demand for semiconductors globally and rising inflation-related costs.
Despite reporting a record increase in quarterly profit, the world's most valuable chip company has reduced capital expenditures. The Taiwan-based chipmaker recently announced a 47.9% increase in third-quarter revenue and a 79.7% increase in net income.
Furthermore, the gross margin was 60.4%, the operating margin was 50.6%, and the net profit margin was 45.8% for the quarter.
As shown by reports, this is due to increased sales of smartphones equipped with TSMC's most powerful processors. According to the chipmaker's official financial report, 5-nanometer shipments accounted for 28% of total wafer revenue.
"Strong demand for our industry-leading 5nm technologies fueled our third-quarter business," said Wendell Huang, TSMC's Vice President and Chief Financial Officer.
"We expect our business to be flattish in the fourth quarter of 2022, as end-market demand weakens and customers' ongoing inventory adjustments are balanced by continued ramp-up for our industry-leading 5nm technologies," the TSMC top official also told the press.
A Closer Look
The Wall Street Journal reports that the semiconductor industry is showing signs of slowing down after a period of record-breaking sales during the pandemic, which increased demand for personal computers, gadgets, and data servers.
This is despite top TSMC officials citing consistent demand from industries such as autos and high-performance computing, which processes data and calculations at high speeds, to back up the company's forecast for continued growth in the coming years.
Meanwhile, Bloomberg reports that TSMC and its peers are dealing with the Biden administration's expansive restrictions on doing business with China, which is reverberating throughout the global semiconductor industry.
TSMC is reported to be continuing its westward expansion efforts despite these urgent worries. Executives claimed that they obtained a license from the US to keep running and expanding their 16 and 28-nanometer lines in Nanjing, China. They joined firms like SK Hynix Inc. and Samsung Electronics Co. in obtaining limited exemptions to new chip restrictions from Washington.
Early in September, the US government proposed and is now putting into effect a new regulation that would restrict sales of computer chips needed for supercomputers and artificial intelligence to China and Russia.
Reuters reported that new laws prohibit US chip companies from exporting chipmaking equipment to Chinese factories that manufacture advanced semiconductors using sub-14 nanometer processes unless the merchants obtain US Commerce Department licenses.
