Yang Jie
TSMC said it expect big benefits from the blossoming artificial-intelligence business, which relies on advanced chips often made by the company. PHOTO: CFOTO/ZUMA PRESS
The world’s top contract chip maker, Taiwan Semiconductor Manufacturing Co., said sales are likely to decline 10% this year and a planned Arizona factory would miss its target of starting mass production next year.
TSMC’s TSM -0.09%decrease; red down pointing triangle statements Thursday reflected industry challenges including soft consumer demand, rising costs and a shortage of various types of skilled worker. The company said people with expertise erecting semiconductor facilities were in short supply in the U.S.
But it offered a more bullish midterm forecast, saying it expects big benefits from the blossoming artificial-intelligence business, which relies on advanced chips often made by TSMC.
The company said it expects revenue in 2023 to be down 10%, a larger percentage drop than the low-to-mid single digits it forecast three months ago. Revenue in 2022 was about $76 billion.
Chief Executive C.C. Wei said a sluggish economic recovery in key markets, particularly China, led to subdued demand for chips in smartphones, servers and cars. He said TSMC customers are exercising caution in managing their inventories to avoid getting overstocked.
TSMC said its capital expenditures this year would come in at the lower end of its previous forecast of $32 billion to $36 billion, compared with last year’s record $36.3 billion. Some 70% to 80% of the investment will go to building up capacity for the most advanced semiconductors, the company said.
Wei said the company witnessed surging demand from AI firms. TSMC, a contract manufacturer, makes chips designed by companies like Nvidia that train chatbots such as ChatGPT to answer questions drawing on vast databases of information.
Wei said chips used for AI functions now account for 6% of TSMC’s revenue, expected to rise above 10% in coming years. TSMC is likely to grab a big chunk of AI-related chip demand, he said, reprising its current role dominating the market for advanced chips.
TSMC is pushing to finish its first factory in Arizona, a project supported by the Biden administration as part of its plan to make the U.S. a top chip-manufacturing hub again. Against the backdrop of worsening relations with China, Washington has been trying to build a chip supply chain centered around the U.S. and allies such as South Korea and Japan.
TSMC Chairman Mark Liu said that construction in Arizona is hampered by a shortage of skilled workers, and that the company might have to bring in experienced technicians temporarily from Taiwan. He said this would delay the start of mass production of 4-nanometer chips in the first factory until 2025.
Previously TSMC described the 4-nanometer chip as the leading product of the first Arizona factory and said production would start in 2024. Overall, it expects to invest $40 billion in Arizona.
Liu said TSMC is still awaiting the U.S. government’s final offer of subsidies and tax credits. The company is counting on that money to cover the cost gap between building in the U.S. and building in Taiwan, at least for the first five years.
TSMC makes the main processors inside Apple’s iPhones. It has about 60% of the third-party chip manufacturing business, followed by South Korea’s Samsung Electronics at 12%, according to research firm TrendForce.
The company said demand for AI-enabling chips is outpacing its ability to supply them. It said it is working as quickly as it can to build its capabilities in advanced chip packaging, in which chips are stacked like Lego blocks to make more-powerful products.Write to Yang Jie at jie.yang@wsj.com
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