TSMC revenues slide for the first time in four years

The world's largest semiconductor contract manufacturer isn't immune to ongoing chip slump

TSMC has posted mixed results for calendar Q1, representing a fall in revenue when reported in US dollars, although some analysts say the company exceeded lowered expectations in the current economic climate.

The world's largest semiconductor contract manufacturer, reported turnover of $16.72 billion, down 4.8 percent year-on-year, and a sharp decrease of 16.1 percent against the previous quarter.

Although this is the first revenue decline for the chipmaking business in four years, it is in line with TSMC's earlier forecast that it would pull in somewhere between $16.7 billion and $17.5 billion for the first quarter.

However, the company claimed a slight year-on-year increase in net income of 2.1 percent, although this was still down by 30 percent compared with the last quarter of 2022.

VP and CFO Wendell Huang laid the blame squarely at the global trading situation, which has seen demand fall away for many semiconductor products due to rising inflation and economic uncertainty, and he expected this to continue for the quarter.

"Our first quarter business was impacted by weakening macroeconomic conditions and softening end market demand, which led customers to adjust their demand accordingly," Huang said. "Moving into second quarter 2023, we expect our business to continue to be impacted by customers' further inventory adjustment."

TSMC said for this quarter, advanced technologies, defined as 7nm or smaller, accounted for 51 percent of the company's total wafer revenue, made up of 20 percent 7nm and 31 percent 5nm. This is a slight decrease from the 54 percent of total wafer revenue represented by such advanced technologies in the previous quarter.

Looking ahead, the company said it expects revenue for Q2 to fall again to somewhere between $15.2 billion and $16 billion.

Meanwhile, reports indicate that TSMC is seeking up to $15 billion in subsidies from the US government's CHIPS Act funding, but is said to be "pushing back" on some of the conditions that Washington has imposed on companies taking its dollars.

TSMC is planning to build two fabrication plants in Arizona to churn out chips using advanced production processes such as 3nm, an investment that the company has estimated could cost it anything up to $40 billion.

This should make the TSMC eligible for CHIPS Act funding, but according to the Wall Street Journal, it is concerned about rules attached to the funding that may require it to share profits from the fabs with the US government and provide detailed information about operations.

As The Register reported recently, these rules call for companies receiving more than $150 million in funding to share a portion of any profits that exceed certain "agreed-upon thresholds," while the reporting requirements specify detailed assessments of projected cash flows, return on investment, and profitability of the sites.

The WSJ quotes TSMC chairman Mark Liu as saying that some of the conditions are unacceptable, and may deter chipmakers from taking part in US efforts to bolster its domestic semiconductor manufacturing capacity.

We asked TSMC for confirmation, but the company would only say that it is in discussions with the US government on this issue and does not have any further comment to provide. ®

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