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Impact of TSMC customer order cutback

Fred Chen

Moderator

"TSMC is betting that the first half of the year will be remembered as the darkness before the dawn. Revenue will bottom out during the second quarter, but the semiconductor industry will then begin to rebound.

However, the forecast for TSMC’s revenue in 2023 is expected to reflect negative growth in the single digits, which is somewhat less stellar than what was predicted at the start of the year.

Wei explained that this is due to flagging customer demand, a higher-than-expected inventory during the fourth quarter of last year, and China’s economic recovery taking longer than expected."

"First of all, the slump in the global smartphone market has induced TSMC customers, such as Qualcomm and MediaTek, to scale down their orders."

"Apple’s financial statement from Q4 of 2022 painted a grim picture. Revenue and profit fell short of expectations, and quarterly growth was 5% in the negative. This was because neither the new iPhone 14 nor the MacBook sold as well as expected. To top it off, the first quarter of the year is generally known as the “slack season”.

Besides Apple, AMD and Nvidia’s high-performance computing (HPC) chips are also based on TSMC’s 5nm products.


“But starting in the first half of this year, server sales have reflected an unmistakable downturn, which has caused AMD and Nvidia to cut orders,” says the analyst.
Smartphone-related products sold 27% less than last quarter. Even HPC products, which make up 44% of all of TSMC’s revenue, declined by 14%."

"Sebastian Hou (侯明孝), Managing Director at Neuberger Berman, observes that many world-class companies like Intel, Samsung, and Micron are scaling back their CapEx. “Since the second half of 2022, the number of companies lining up to procure equipment has dwindled. The way things are now, TSMC is in no hurry to get in line; they will buy when they really have the need,” he says.

Both the macro-environment and the adjustment of customer orders show that capacity utilization is not what it used to be. Hou predicts that procurement of new equipment will trend toward conservative."


Nevertheless:

"As for TSMC’s capital expenditure (CapEx) for 2023, the semiconductor juggernaut maintained that it will be between NT$32 and 36 billion, just as what was announced during the previous investor conference. There will be no downsizing in this regard." This is already a reduction from 2022's 36.3 billion: https://www.reuters.com/technology/tsmc-q4-profit-up-78-beats-market-expectations-2023-01-12/
 
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To clarify, as a typical policy of TSMC not to comment on its customers, TSMC CEO C. C. Wei didn't state that "First of all, the slump in the global smartphone market has induced TSMC customers, such as Qualcomm and MediaTek, to scale down their orders."

It's the article's author own words.
 
To clarify, as a typical policy of TSMC not to comment on its customers, TSMC CEO C. C. Wei didn't state that "First of all, the slump in the global smartphone market has induced TSMC customers, such as Qualcomm and MediaTek, to scale down their orders."

It's the article's author own words.
That's correct, the statement about TSMC customers was from the author, not C. C. Wei.
 
Well, one thing they have going for them is that Intel will be using it for a large part of their Meteor Lake processors. I haven't heard officially what chiplets will be made at TSMC, but clearly the GPU will be, while the CPU will not be. The interposer should be Intel, but the SoC and IO tiles seem quite possibly to be made at TSMC, given the limited scope of Intel 4. However you slice it, and given Intel's massive market share in client, and the resolution of excessive downstream inventory, it could be a significant driver for TSMC revenue.
 
Well, one thing they have going for them is that Intel will be using it for a large part of their Meteor Lake processors. I haven't heard officially what chiplets will be made at TSMC, but clearly the GPU will be, while the CPU will not be. The interposer should be Intel, but the SoC and IO tiles seem quite possibly to be made at TSMC, given the limited scope of Intel 4. However you slice it, and given Intel's massive market share in client, and the resolution of excessive downstream inventory, it could be a significant driver for TSMC revenue.
Yes, except for the CPU tile, the others (GPU, I/O, SoC) are expected to be made at TSMC. So the Meteor Lake launch is key.
 
C.C. Wei did mention the SoC slowdown but he did not mention customer names. He would never do that in a public forum.

I'm wondering if this could be another knee jerk reaction to the recession narrative. Not unlike the pandemic where orders were cut prematurely. Fab utilization is low right now and we can never get those lost wafers back. If the economy does a hockey stick rebound, like some predict, will we have shortages?
 
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