Chipmaker Shares Fall as TSMC Factory Delay Clouds Outlook

Shares in Taiwan Semiconductor Manufacturing Co. (TSMC), one of the world's largest chipmakers, have taken a hard hit, per Bloomberg, registering a drop in value by as much as 3.8%. This comes in the wake of an adjusted outlook that forecasts a 10% decrease in sales for the year, contrary to previous estimates of a single-digit decline. The revised projections, coupled with the delay in the company's Arizona project, underline the ongoing struggles in the electronics market.  Notably, TSMC is a primary supplier of chips to tech giants like Apple and Nvidia.

TSMC's reduced revenue forecast for 2023 has lowered hopes that the slump in chip production resulting from COVID would abate.  It also comes at a time when demand for such products continues to increase with the advent of technologies like AI. The company's management advised investors to moderate their expectations, hinting at the uncertainty regarding the sustainability of the high-demand trend.

The timing of this delay is also unfortunate for the current Biden administration, which has issued a reported $50B in subsidies to the Chips and Science Act.  As a stop-gap measure, TSMC Chairman Mark Liu indicates that the company will “…aim to resolve this by sending skilled technical workers from Taiwan to the US”.

Global Chip Industry Feels the Pressure

The downward trend affected not just TSMC, but also had repercussions across the global chip industry as a whole.  The following are examples of this,

• ASML Holding
• Tokyo Electron
• Samsung Electronics
• SK Hynix
• NVIDIA

Interestingly, it is believed that the delayed launch of its Arizona plant is not due to issues surrounding the construction of the facility itself, but rather, hiring enough skilled workers to run it.  Simply put, if the United States wishes to attain great levels of independence within the sector, it will need to make a concerted effort to promote appropriate education and pathways toward becoming relevant engineers.

TSMC's Global Expansion Strategy

Bloomberg reports that one of the reasons for establishing a manufacturing plant in Arizona – now scheduled to launch in 2025 – is to allay customer concerns about geopolitical uncertainties in the Taiwan Strait.  Essentially the move is one of various being taken in an effort to diversify its manufacturing facilities.

As it stands, TSMC is believed to have invested at least $40 billion in two Arizona factories and is constructing an additional $8.6 billion facility in Japan.