TSMC may significantly reduce capital expenditures

TSMC (Taiwan Semiconductor Manufacturing Company) has recently been impacted by a global economic downturn, a weakening end-market demand, and ongoing inventory adjustments by clients, leading to a transient decline in production capacity. Previous reports suggested that TSMC requested major semiconductor tool suppliers, including ASML, to postpone the delivery of essential equipment to the wafer fabrication plants, primarily due to uncertainties in customer demand.

TSMC articulated a focus on the “diversification” of the global supply chain without delving into the underlying reasons, eliciting increased concerns regarding its outlook. According to a report by Ctee, Goldman Sachs anticipates TSMC’s capital expenditure in 2023 to remain steady at approximately $31.6 billion. However, the projection for 2024 has been revised downwards from $28 billion to $25 billion, indicating a reduction exceeding 20% for the subsequent year. The utilization rate of TSMC’s 3nm production capacity is also expected to dip, with estimates for 2024-2025 hovering around 70,000 to 80,000 wafer units monthly, a downturn from the initial projection of 80,000 to 90,000 units.

Goldman Sachs posits that the adjusted revenue expectations for TSMC might be linked to market fluctuations and policy modifications by the semiconductor giant. While TSMC has several new wafer fabrication plants under construction worldwide, diminished capacity requirements have resulted in a trimmed capital expenditure budget, decelerating the momentum of certain projects.

Nevertheless, Goldman Sachs retains an optimistic stance on TSMC’s leadership in the industry. Given its quasi-monopolistic status, especially in the realms of high-performance computing and artificial intelligence chip manufacturing, order volume is poised to remain robust, ensuring year-on-year revenue growth.