TSMC Warns of Possible Revenue Drop, Spending Cut

The world’s biggest contract chip maker has set this year’s capital-expenditures budget between $32 billion to $36 billion, compared with last year’s record $36.3 billion. Some 70% would go to building up capacity for the most advanced chips, the company said Thursday.

The possible drop and cut—even if relatively slim—are a sign that TSMC, a major supplier to the world’s most important chip developers including

Apple Inc.,

is running out of steam, and underscore the headwinds faced by the semiconductor industry after a period of strong expansion that started in 2020.

The pandemic triggered an increased demand for devices such as smartphones and data centers as many people worked from home, leading to a semiconductor shortage. In recent quarters, chip makers have been grappling with weakening demand and higher costs from inflation.

Chief Executive

C.C. Wei,

in an earnings call with analysts, said he forecasts a sharp drop in inventory in the semiconductor supply chain through the first half of this year. That would likely be followed by a recovery in the second half of the year, he said.

For the full year, Mr. Wei said: “We expect the whole industry to drop slightly but TSMC to grow slightly.” He said he projects the global semiconductor industry, excluding memory chips, to post a 4% revenue decline in 2023.

Many semiconductor makers have slowed investment or cut employees. Memory-chip maker

Micron Technology Inc.

said last month it would be laying off around 10% of its workforce.

TSMC is in the midst of a global expansion, building new semiconductor-fabrication plants in Arizona and Japan. Its executives have said it would steadily increase production capacity outside of Taiwan, where it currently builds most of its chips, to address concerns from its clients over production concentration in the self-ruled island that China claims as its own, as tensions between the U.S. and China grow over Taiwan.

TSMC is considering a second factory in Japan, Mr. Wei said, confirming an earlier Wall Street Journal report. It is also studying the feasibility of building new facilities in Europe, especially for auto makers, he said.

Last month, TSMC said that it would more than triple its investment in Arizona to $40 billion and that it planned to make 3-nanometer chips there, the most advanced so far in the industry. Building such facilities in the U.S. costs four to five times more than building similar facilities in Taiwan, TSMC’s Chief Financial Officer

Wendell Huang

said in the earnings call.

TSMC said its net income for the quarter ended Dec. 31 rose by a record 78% from the same period a year earlier to 295.90 billion New Taiwan dollars, equivalent to $9.72 billion. Fourth-quarter revenue increased 43% from a year earlier to NT$625.53 billion. For the full-year, the company posted NT$2.264 trillion in revenue and NT$1.017 trillion in net profit—both highest on record.

—Kosaku Narioka contributed to this article.

Write to Yang Jie at [email protected]