TSMC Misses Sales Forecasts as Demand for Chips Slows

‍The shortfall at TSMC suggests that even the world's largest contract manufacturer of chips can't escape a global slowdown in spending by consumers affected by rising interest rates and accelerating inflation.

January 10, 2023

4 minutes

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Taiwan Semiconductor Manufacturing Co. (TSMC) has reported its first quarterly revenue miss in two years, indicating that the global decline in electronics demand is starting to affect the chip giant.TSMC's revenue for the fourth quarter of 2018 was NT$252.2 billion (US$8.1 billion), below the NT$259.4 billion that analysts had been expecting. This marks the first time that TSMC has missed its quarterly revenue forecast since the second quarter of 2016.The company attributed the revenue miss to a "challenging macroeconomic environment," as well as weaker-than-expected demand for high-end smartphones. TSMC is the world's largest contract chipmaker and counts Apple, Qualcomm, and Huawei among its major customers.
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The shortfall at TSMC suggests that even the world's largest contract manufacturer of chips can't escape a global slowdown in spending by consumers affected by rising interest rates and accelerating inflation. TSMC reduced its capital spending plans by about 10% to $36 billion last year, and some analysts have warned it may further delay expenditure on expansion in 2023.
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TSMC, which is the exclusive supplier of Apple Inc.'s Silicon chips for iPhones and Macs, may also have been affected by problems at the US tech giant's assembly operations in China. Apple was forced to trim output estimates after Covid-related chaos at a plant in Zhengzhou exposed vulnerabilities in the company's supply chain.
Fourth-quarter revenue at TSMC rose 43% to NT$625.5 billion ($20.6 billion), according to Bloomberg calculations. That missed the NT$636 billion predicted by analysts on average. TSMC said its December sales advanced 24% to NT$192.6 billion.
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TSMC's shares fell 27% last year after doubling during the pandemic, but they are up 8% this year. The global economic slowdown has diminished consumer demand for many products that TSMC chips go into, but the company and its customers still expect the long-term trend in electronics demand to keep going up.
Last month, TSMC began mass production of next generation chips and increased its investment in the US state of Arizona to $40 billion. This move will help the company keep up with global demand for its chips and maintain its position as a leading semiconductor manufacturer.
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Biden and Cook team up to celebrate TSMC's $40 billion investment in the US chip industry. This move is a big win for American workers and the economy, and it's a testament to the strength of the US chip industry.
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TSMC is under pressure to diversify its geographic distribution of advanced chipmaking, and is working with governments like the US and Japan on developing a more global footprint. Global policy makers and customers are increasingly leery of their technological reliance on an island that Beijing has threatened to invade, and have pushed TSMC to shift some production abroad.