Apple chip maker TSMC sees record revenue but cuts capex

Apple’s M-series Mac range uses TSMC-manufactured, Apple-designed chips

Apple’s chip supplier TSMC announced record Q4 revenue but warned Q1 revenue may drop as much as 5% and revealed plans to cut capex spending in reaction to global economic slowdown.

TSMC sees market slowdown, but thinks its cyclical

To put this into context, this slowdown does follow a 78% increase in Q4 profit, so it may be seen as a little inevitable. Coming out of Covid as we’re being told we are poses different challenges, while increasing energy prices are also having an impact in terms of cooling consumer spending.

Revenue climbed 26.7% to $19.93 billion, versus a previously anticipated $19.9 billion to $20.7 billion.

All the same, decline is taking place across the tech sector. Even Apple is impacted – indeed, while overall PC sales from other manufacturers declined double digit percentages, Apple’s Mac sales also saw a 2% dip. The company is clearly not immune.

“Our fourth quarter business was dampened by end market demand softness, and customers’ inventory adjustment, despite the continued ramp-up for our industry-leading 5nm technologies,” said Wendell Huang, VP and Chief Financial Officer of TSMC.

“Moving into first quarter 2023, as overall macroeconomic conditions remain weak, we expect our business to be further impacted by continued end market demand softness, and customers’ further inventory adjustment.”

Expects recovery toward end of year

TSMC said it expects the semiconductor cycle to “bottom sometime in first half and see a recovery in second half 2023,” TSMC CEO, CC Wei explained.

He says the rebound will be driven by new product launches, including new product families. While he nodded to AI-enabled products, it’s hard not to ponder what other products may be in the frame…

However, despite the headlines the reduction in capex is relative peanuts. TSMC says it will decrease this spending to $32-36 billion down from $36.3 billion in 2022. That is perhaps a 10 percent slice, but the 90% remaining is still a significant amount.

The company also predicts Q1 revenue of up to $17.5b, compared to $17.57b last year. This can hardly be described as a bloodbath.

The company insisted that this slower demand was a cyclical issue and 2023 overall would be a slight growth year for the company.

It also promised to continue expansion internationally which likely includes deployment of new chip manufacturing facilities in the US. Those factories will churn out 3nm chips, and much of this production will be destined for use in Apple’s hardware. TSMC is also considering opening a factory to produce auto industry processors in Europe.

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