TSMC made record profits last quarter, but will reduce investments in 2023

TSMC made a record profit of 9 billion euros in the last quarter of 2022. The company announced this on Thursday during the presentation of its quarterly figures. However, the company will make fewer investments in 2023 due to declining demand for chips.

TSMC recorded last quarter a profit increase of 78 percent compared to a year earlier, for a total of 9 billion euros. That’s a record for the company, writes Reuters news agency. Turnover increased by 42.8 percent to 19.1 billion euros. In the past quarter, the company mainly achieved more turnover from advanced HPC chips, which are used for data centers and supercomputers.

At the same time, TSMC is lowering its expectations for the beginning of 2023. The company expects turnover of 15.5 to 16.3 billion euros in the coming quarter, lower than initially expected. The company will also reduce capital expenditure in the coming year. In the past year, the company spent more than 36 billion dollars, for example on R&D and the construction of new chip factories. The company wants to spend 32 to a maximum of 36 billion dollars this year. TSMC CEO CC Wei expects that the chip sector will ‘shrink slightly’ in 2023, but that TSMC will ‘grow slightly’, Reuters writes.

TSMC is adjusting its investments downwards due to inventory corrections and declining demand for chips. This has been going on for some time, especially for consumer electronics such as smartphones. Demand for chips in other market segments, such as the aforementioned HPC segment, has remained higher to date. Such markets are less sensitive to economic uncertainty.

This is also reflected in TSMC’s turnover distribution. Sales from smartphone chips fell by 4 percent in the past quarter, but TSMC still gets 38 percent of its revenue from the smartphone segment. Turnover from other direct consumer electronics fell by 23 percent and accounted for 2 percent of TMSC’s total turnover in the last few months of 2022. Turnover from HPC actually increased by 10 percent to 42 percent of total turnover. High-performance computing is therefore TSMC’s largest source of income.

Furthermore, TSMC achieved 32 percent of its turnover in the past quarter from 5nm processes, until recently its most advanced nodes. 7nm accounted for 22 percent of sales. The Taiwanese chip giant started mass production on 3nm at the end of December, but results on that node are not included in the quarterly figures.