But the rest of the world will find little comfort.
His big bombshell came when he announced a 10% cut in spending plans for this year. As recently as July, TSMC predicted it will shell out a record $40 billion, compared to a previous forecast of as much as $44 billion. It’s now looking at $36 billion, which means it cleared $8 billion worth of orders in just six months.
There’s no way executives at major equipment vendors ASML Holding NV, Lam Research Corp. or KLA Corp. can put a positive spin on this. In fact, Applied Materials Inc. flagged these problems just 12 hours earlier when it cut its own earnings guidance for the fourth quarter.
While much attention has recently been focused on the Biden administration’s tighter restrictions on US chip technology exports to China, TSMC described the impact as “limited and manageable.” The company confirmed that it received a one-year authorization from the US to continue ordering equipment for 28-nanometer and 16-nanometer manufacturing at its Nanjing factory, a small but significant reprieve.
In truth, the problems facing TSMC and the global chip industry go beyond US attempts to rein in China.
CEO CC Wei was blunt. The market is weakening due to lower demand for smartphones and personal computers, while some clients delayed the introduction of new products, he said without naming the clients. Even TSMC will suffer, with factory utilization remaining weak for the next six to nine months. The company also signaled the possibility of reducing spending next year.
One bright spot could be the first drop in inventory since before the Covid pandemic, but that’s also a sign that customers like Nvidia Corp., Apple Inc. and Advanced Micro Devices Inc. lack the confidence to hold large stocks. in anticipation of future orders.
With global chipmakers including Samsung Electronics Co., Intel Corp. and Micron Technology Inc. all pointing to pain in the sector, TSMC stood out as the last beacon of hope. Its position as the world’s most advanced semiconductor company and monopoly on high-end components used in smartphones, data centers and high-performance computers seemed to make it immune to the problems of lesser companies.
But even TSMC is no match for the Fed’s monetary tightening, Moscow’s relentless war on Ukraine, and ongoing supply chain friction that has stalled equipment deliveries.
As executives ran through the company’s numbers, explained their outlook and technology roadmap, and answered questions, the message was one of quiet confidence that all will be well, perhaps sometime next year. Everyone else will probably see it differently. It’s hard to find solace when even the king of the technological jungle falls.
More from this writer and others at Bloomberg Opinion:
• These tougher China token rules are terribly timed: Tim Culpan
• We still have an economic recovery, right?: Daniel Moss
• A new normal is dividing the global chip industry: Tim Culpan
This column does not necessarily reflect the opinion of the editorial board or of Bloomberg LP and its owners.
Tim Culpan is a columnist for Bloomberg Opinion who covers technology in Asia. Previously, he was a technology reporter for Bloomberg News.
More stories like this are available at bloomberg.com/opinion
