TSMC downgraded as analysts warn of worst slump in a decade

Some estimates say the sector will have contracted by as much as 23% by the end

Shares in key Taiwanese chipmaker TSMC may have been up in the past few days after it reported better than expected Q3 results, but many financial analysts have downgraded their forecasts for the company amid warnings the tech downturn is likely to be deeper than feared.

The world's largest semiconductor contract manufacturer announced its revenue for calendar Q3 last week, revealing it had beaten its own estimates to hit NT$613.14 billion ($20.23 billion). Shares in the company were up 4 percent following the news.

But the warning signs were clear as TSMC predicted Q4 revenue growth will likely be flat. TSMC also said it was cutting back on capital investment in new manufacturing capacity after multiple chip vendors reported falling revenues and warned the semiconductor industry is heading into a downcycle.

And while shares in TSMC may have rallied, analysts have downgraded their longer-term forecasts for the company, with many cutting their 12-month share price estimates. Goldman Sachs has reportedly lowered its price target for TSMC and removed the company from its list of top performing picks, but kept it as a buy recommendation.

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Some EU countries are said to want funds from the European Chips Act to boost production of current cutting-edge chips, not just to be invested in developing and producing future technology.

This is according to Reuters, which cites an undisclosed EU document stating that some countries want Chips Act funding to go into existing chips used by companies such as carmakers.

According to the European Commission, the current plan only allows state funding for European "first-of-a-kind" production facilities, although details still need to be decided between EU countries and lawmakers before it becomes law.

According to the South China Morning Post, Goldman Sachs is one of just several banks and financial analysts that have downgraded TSMC's forecast share price. So far $240 billion has been wiped from the company's market value this year.

This appears to be partly in response to the weakening demand for semiconductors, which The Register has been reporting on for some time, but also because of the latest US export controls on supplying technology to China.

This move sparked fears that the ban will dent the profits of many technology companies, especially those in the US, and may well lead to the semiconductor downturn being deeper and longer lasting than expected.

However, TSMC's share price also fell earlier this year when Korean chipmaker Samsung announced it had beaten its Taiwanese rival to manufacturing chips using a 3nm production process, sparking fears that TSMC was losing its technology lead and may lose custom because of that.

The downbeat mood is also echoed in a fresh report on the European semiconductor industry from Jefferies Financial Group, which says that automotive chip demand is holding up, but there are rising cancellations from other customers affecting semiconductor companies.

Most chipmakers reported strong order books and outlooks at broker conferences until early September, the report finds. But the pace of cancellations and order pushouts from non-auto segments like PCs and smartphones has risen since. Last week, Gartner said PC shipments recorded in Q3 fell year-on-year at the fastest rate ever seen.

Jefferies warns that the semiconductor industry may be heading into its its deepest downcycle in over 10 years, and predicts that the sector may have contracted by as much as 23 percent when it bottoms out by the middle of 2023. ®