This week, Taiwanese company TSMC opened the season of quarterly reports, and its status as a market leader in contract manufacturing services for chips allows it to adequately predict trends that are characteristic of the entire semiconductor industry. Management predicted a 4% decline in revenue for the entire industry for the year, but TSMC expects to end the period with a positive revenue trend. More specifically, the company expects to experience a 5-9% decline in revenue in the first half of the year, but in the second half of the year revenue will be higher than in the same period last year, the demand recovery will be "healthy", as noted by TSMC representatives. If the entire industry, excluding shipments of memory chips, reduces revenue by 4% at the end of the year, then the contract chip manufacturing services segment will drop by 3%, according to CEO C.C. Wei. In dollar terms, TSMC's revenue should rise slightly in 2023, he added.
When this statement interested the participants of the quarterly reporting conference, CC Wei additionally explained that the smartphone and PC market will still decrease in the number of devices delivered this year, but the specific content of chips in each device will continue to grow. This will make it possible to compensate to some extent for the decline in sales of finished devices. Secondly, TSMC will continue to offer new products and cover new market segments, which will also increase revenue.
At the same time, the head of TSMC does not argue with the fact that the shortage of automotive chips continues to persist, and demand for them is growing. The supply situation is improving, but TSMC is still unable to fully meet the demand for automotive chips. By the end of the year, TSMC will definitely increase the volume of deliveries of chips for the needs of the automotive industry.
As company representatives explained at the event, of this year's planned capital expenditures of $32 to $36 billion, approximately 70% will go to advanced lithography, 20% will go to specialized technical processes (mostly mature), and the remaining 10% will be spent on developing services for advanced packaging options for chips, purchase of technological equipment and other needs.
TSMC management paid special attention to the expansion of mature technical processes, which are considered nodes from 28 nm and above. First, there was a clarification on the range of technical processes that will be used at the plant under construction in Japan. It will use 28nm, 22nm, 16nm and 12nm process technologies, and production will be launched by the end of 2024. By the way, at the TSMC plant in China the output of 28-nm products is also expanding, and the existing US sanctions restrictions simply do not apply to this area.
In general, in the next five years, TSMC is ready to locate up to 20% of the capacity involved in the production of chips using mature technical processes outside of Taiwan. Apparently, this also applies to a possible branch in Europe, since European automakers need such chips. Naturally, the decision to build new enterprises outside of Taiwan will be made based on the readiness of governments of other countries to subsidize core projects, as well as on the availability of sufficient demand in the local market. In the United States, as TSMC representatives explained, the cost of building enterprises is four or five times higher than in Taiwan, and it is desirable to compensate for this difference precisely through government subsidies. The very cost of chip production in the US, as noted earlier, is only one and a half times higher.