TSMC defies chip downturn with record Q4; cuts 2023 capex as demand weakens

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By Yimou Lee and Sarah Wu

TAIPEI (Reuters) - Taiwanese chipmaker TSMC reported a forecast-beating 78% rise in quarterly profit on Thursday, as strong sales of advanced chips helped it defy a broader industry downturn that battered cheaper commodity chips.

Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world's largest contract chipmaker, is a rare bright spot in the global tech industry which is grappling with worsening consumer demand brought about by decades-high inflation rates, rising interest rates and economic downturn.

Rival Samsung Electronics (OTC:SSNLF) Co Ltd's quarterly profit tumbled two-thirds to an eight-year low, with the South Korean firm blaming a weakening global economy which hammered memory chip prices and curbed demand for electronic devices.

TSMC's dominance in making some of the most advanced chips for high-end customers such as Apple Inc (NASDAQ:AAPL) has shielded it from downturn. Still, it cut its 2023 capital expenditure plan on Thursday, underscoring worsening demand outlook.

The chipmaker now expects to spend $32 billion to $36 billion, versus $36.3 billion in 2022, and sees first-quarter revenue in a range of $16.7 billion to $17.5 billion, compared with $17.57 billion a year earlier.

"We have confidence in the second half the business would rebound," boosted by product launches including for technology such as artificial intelligence, CEO C.C. Wei said on Thursday.

"We expect the whole industry to drop slightly but TSMC to grow slightly" in 2023, he said.

TSMC, Asia's most-valuable listed firm and backed by billionaire Warren Buffett's investment conglomerate Berkshire Hathaway (NYSE:BRKa) Inc, has repeatedly said business would continue to benefit from a "mega-trend" of demand for high-performance computing chips for 5G networks and data centres, as well as increased use of chips in gadgets and vehicles.

It reiterated on Thursday slower demand was a cyclical issue and 2023 overall would be a slight growth year for the company.

For October-December, TSMC booked record net profit of T$295.9 billion ($9.72 billion) from T$166.2 billion a year earlier. That compared with the T$289.44 billion average of 21 analyst estimates compiled by Refinitiv.

Revenue climbed 26.7% to $19.93 billion, versus TSMC's prior estimated range of $19.9 billion to $20.7 billion.

The fourth quarter "was dampened by end-market demand softness and customers' inventory adjustment," Vice President and Chief Financial Officer Wendell Huang told a briefing. Such conditions will carry into the first quarter, Huang said.

TSMC's share price fell 27.1% in 2022, but is up 8.5% so far this year giving the firm a market value of $412.78 billion. The stock rose 0.4% on Thursday versus a 0.1% fall for the benchmark index.

($1 = 30.4420 Taiwan dollars)