After speculation in the Taiwanese press that it will further reduce its revenue guidance for the year, the Taiwan Semiconductor Manufacturing Company (TSMC) has denied these reports. TSMC reported its second quarter earnings in July and reduced its revenue guidance for the second time during the year as management explained that tightness in the industry is expected to persist for longer than initially expected. TSMC's first quarter earnings call had seen management predict a mid to low single digit revenue drop and the second quarter earnings call increased this to double digits or 10%. The Taiwanese fab's latest statement is sticking with a 10% revenue decline for 2023, refuting local reports that TSMC will again cut the guidance.
TSMC Asserts That Full Year 2023 Revenue Will Drop By 10%
Like its American peer Intel, TSMC is currently facing the full brunt of a slowdown in the semiconductor industry. Intel is aggressively developing new chip manufacturing technologies and expanding its production capacity as well, during a precarious time when its revenue is falling and necessitating a need to cut down costs.
TSMC is facing a similar dilemma, as not only is it ramping up 3-nanometer production and investing in new facilities, but the firm's revenue is also expected to drop by 10% this year. TSMC is building a new chip manufacturing facility in Arizona, which has already seen a schedule slip. At the same time, the firm is building 2-nanometer chip manufacturing facilities in Taiwan in order to meet its self set mass production timeline.
TSMC plans to mass produce 2-nanometer chips in 2025, and its second site for making the chips in Taiwan's Taichung City is facing delays in the regulatory approval process. This has created worries that the firm will be unable to start building the site by the end of this year, and TSMC aims to mitigate any delays to its mass production timeline by converting its new facilities in Kaohsiung to make the advanced chips as well.
TSMC's shares have dipped on the Taiwanese stock market earlier today after reports suggested that the firm's free cash outflows will touch a new quarterly record this year amidst a slowing demand, low inventory turnover and overall high costs. The stock opened at NT$544 and dipped to NT$534 before slightly recovering and closing at NT$537. The main reason behind the share price drop was due to speculation that the drop in its free cash flow will also harm the firm's dividend. TSMC pays an NT$2.81 dividend per share, lending the stock a 2.09% annual yield.
Analysts also expect that TSMC should fare off better in the second half of this year when compared to the first half. This is due to a ramp in demand from Apple, as the firm heads into its 2023 product launch cycle and the ability of TSMC to rapidly ship out products for NVIDIA by manufacturing them through its CoWOS technology.
This demand should enable TSMC to meet its 2023 revenue targets, and according to the analysts, the firm's cash investments should also help it weather any drops in its cash flows. For the third quarter, the Taiwanese company expects that the revenue will range between $16.7 billion and $17.5 billion, with the lower end of the guidance marking a hefty $3.5 billion annual drop from the $20.23 billion that the company had earned by the end of last year's third quarter.
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