World’s Top Chipmaker Posts Drop in Revenue, Its First Decline in Four Years

Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s top chipmaker, posted a double-digit drop in revenue last month, its first decline in four years. The chip-making giant’s filing on April 10 showed that revenue for March fell 15 percent from the same month a year earlier, after economic headwinds hit the semiconductor market, according to Dow Jones Newswires. TSMC said that revenue fell to $4.78 billion from $5.63 billion in March, after growing January and February, for its first monthly loss since May 2019. However, first-quarter revenue in 2023 is expected to rise 3.6 percent from a year earlier, to $16.73 billion. The computer chip industry has witnessed a boon in constant revenue growth, fueled by rising semiconductor prices and factories operating at full capacity. Taiwanese Chipmaker Sees Losses Into the Second Quarter Due to Weakened Demand TSMC chief financial officer Wendell Huang said at the beginning of the the year that business in the first quarter would likely be affected, “as overall macroeconomic conditions remain weak, we expect our business to be further impacted by continued end market demand softness, and customers’ further inventory adjustment.” TSMC had projected first-quarter revenue of between $16.7 billion and $17.5 billion, down from $19.93 billion in the fourth quarter. The bad news has put the April 20 release of the first-quarter earnings report in the spotlight. The drop in revenue in March may lead to a lower performance than investors expected for the first three months of the year, which had been at $17.25 billion, according to economists surveyed by FactSet. Analysts’ estimates are now expected to be revised lower, with TSMC stock closing down 1.35 percent on Monday. The decline in global chip demand may have an effect on its rival. Intel, as a benchmark in the semiconductor industry, appears to pessimistic. Some analysts believe that things will become worse for the industry in the second quarter, before gradually improving toward the end of this year. The fall in earnings for the first quarter would be the second in a row of weak chip sales, as consumers and businesses tread through a wave of surging inflation, rising interest rates, and the sudden bank failures last month. Global Computer Chip Producers Adjust to Lower Forecasts Meanwhile, Samsung, the world’s second-largest contract chipmaker, announced last week that it would be scaling back memory-chip production in response to dwindling demand for DRAM and SSDs. Experts were concerned when Samsung warned investors that it did not expect to bring in enough earnings until the excess supply of memory chips is reduced to “meaningful” levels. However, the situation for TSMC, which controls 56 percent of the semiconductor market, is not as dire. The Taiwan-based company, unlike Samsung, has little need to reduce chip output, but will said that it would reduce its capital expenditure to anywhere from $32 billion to $36 billion. The failure of TSMC to make its sales targets for the first quarter of this year is another sign of weak demand for items like smart phones, video game consoles, and PC hardware components. Both TSMC and Samsung, however, are optimistic that consumer demand for electronics will rebound in the second half of this year. As such, they do not intend to reduce their investments in production capacity and in advancements in fabrication technology. At the same time of the dire quarterly report, TSMC and Samsung are in negotiations with the Biden administration to ease some of the requirements for U.S. taxpayer subsidies under the CHIPS Act, which was designed to boost the American semiconductor manufacturing industry. “We can confirm that we are communicating with the U.S. government about the CHIPS ACT guidance,” TSMC told Reuters in an emailed statement. TSMC has plans to invest in a $40 billion new plant in Arizona and wants access to the $52 billion fund in subsidies provided by the CHIPS Act for chip research and manufacturing without having to give away its corporate strategy or pay additional taxes on excess profit. The Department of Commerce told Reuters that it would protect the chipmaker’s confidential business information and expects “upside sharing” will only happen in instances where projects significantly exceed projected cash flow. Reuters contributed to this report.