TSMC Forecasts 10% Drop in 2023 Sales Amid Global Chip Demand Slowdown


  • TSMC’s AI chip demand surge has not been enough to offset broader end market weakness amid the global economic recovery slowdown.
  • The company expects third-quarter revenue to pick up but warns of milder seasonality and cost challenges in the second half of the year.
  • TSMC’s investment spending for this year is estimated to be at the lower end of the previously forecasted range, and production at its Arizona plant is facing delays due to a shortage of skilled workers.

Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world’s largest contract chipmaker, has forecasted a 10% drop in sales for 2023 as global economic challenges dampen demand for chips used in various industries like automobiles and cellphones. Despite a high demand for artificial intelligence (AI) chips, TSMC’s strong position as the leading AI chip manufacturer hasn’t fully offset the broader market weakness resulting from the slower-than-expected global economic recovery. The chairman of TSMC, Mark Liu, emphasized that the short-term AI demand surge is not a reliable indicator for the long term, making it difficult to predict future demand trends.

To meet customer needs amid the AI demand surge, TSMC plans to increase its advanced packaging capacity as quickly as possible. However, the company expects investment spending to be at the lower end of its previous forecast, with a slower increase in the coming years after significant recent increases. The forecast for third-quarter revenue shows a slight improvement, estimated to be around $16.7 billion to $17.5 billion. Yet, TSMC warned of a milder seasonality in the second half of the year, partially due to higher electricity costs and the production ramp-up of its most advanced N3 technology. Additionally, production at TSMC’s first plant in Arizona will be delayed due to a shortage of specialist workers, leading to a pushback of the production schedule for N4 process technology to 2025.

In the second quarter, TSMC reported a 23.3% decline in net profit, outperforming forecasts but marking its first on-year drop in quarterly profit since Q2 2019. The company revised down its 2023 revenue forecast to a 10% decline, and second-quarter revenue dropped by 13.7% year-on-year. As the major supplier to Apple Inc., TSMC must navigate an uncertain industry outlook and a U.S.-China chip dispute that poses potential vulnerabilities.

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