The undisputed king of the semiconductor world, Taiwan Semiconductor Manufacturing Company, has announced a drastic 10% cut in its spending for the upcoming year. Near the beginning of this year TSMC was predicting that it would be spending a record US$44 billion. This 10% cut relates to an amount of more than US$8 billion that the company will not be spending on orders in the foreseeable future.
The net income at the company was greater than the predictions, but this was largely due to a 3% drop in the Taiwanese dollar against the US dollar, instead of a real increase to its bottom line. Therefore, equipment suppliers, and investors in TSMC, will likely find little to be cheerful about.
However, according to the company, the revenue outlook for the current quarter looks to be in good shape, and executives at TSMC believe that company growth will be healthy. Again, the long-term gross margin profit figure of 53% was restated.
At present the semiconductor market is weak due to the downward spiral in demand for smartphones, PCs and other consumer technology. Many semiconductor customers have delayed the release of new products until the market sees improvement. Accordingly, TSMC has stated that factory utilisation will remain poor up to at least the end of 2Q2023, which means that factory spending will also be lower next year.
The outlook from other manufacturers was equally confusing: most reported a gloomy situation, but still had a positive outlook. Micron reported a record revenue year in mobile, auto, industrial and networking markets. However, the revenue has seen a steady decline over the last few financial quarters. A drop of 25%, amounting to $2 billion over the previous quarter and a drop of around 20% over the same period last year, was announced.
Although Micron generated record revenue of $30,8 billion for the full year, the company also announced a large cut in spending. Its supply growth will be reduced, including a 50% reduction in wafer fabrication equipment capex over last year. However, according to the executives, this will hopefully see the company emerge from the worldwide downscaling, well positioned to grab hold of the long-term demand for memory and storage.
Intel is another large semiconductor company that has not been unscathed by the poor economic climate. Although a revenue of $15,3 billion is reported, this is a 17% year-on-year decrease. Intel CEO Pat Gelsinger reports, “This quarter’s results were below the standards we have set for the company and our shareholders. We must and will do better. The sudden and rapid decline in economic activity was the largest driver, but the shortfall also reflects our own execution issues.”
On the back of the worldwide shortage of semiconductors, many devices have seen an increase in the average selling price (ASP). IC Insights have forecast an 11% increase in power transistor sales, and combined with an increase in the ASP, will see a sharp increase in revenue. The ASP for power transistors is expected to increase 11% on top of the 8% increase for the same sector last year, according to the latest update to the McClean Report. This will result in a sixth-straight record high level totalling $24,5 billion for this year.
Power transistor prices have climbed higher since 2021. Shortages of power devices and other semiconductors have kept ASPs high in numerous sectors, especially automotive and industrial equipment. This is despite slowdowns in the worldwide economic growth, reduced spending by companies in response to higher inflation figures, and rising interest rates.
As is alluded to on the graph, the projected 11% increase in the ASP of power transistors will be the highest percentage increase since the 2010 recovery year, after the poor performance in 2009.
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