But the war in Ukraine, rising tariffs and slowing international trade appear to be merely obstacles to TSMC’s march forward, rather than eroding its global dominance. The semiconductor industry is highly cyclical, and past downturns have resulted in long-term and double-digit declines for the Hsinchu-based company. Not this time.
The overall chip industry, excluding memory, is expected to decline 4%, while the foundry sector is expected to decline 3%, but the company expects some growth.
TSMC support is an addiction in the chip world. Not only are more and more devices going electronic, from watches to beds, but old-school devices like computers require more per unit. CEO CC Wei offered a simple example to explain why it is increasingly resilient to the changing economic climate: Both PC and smartphone shipments will decline this year, but chip volumes will increase.
“The value of semiconductors is increasingly being recognized in our daily lives,” Wei said on Thursday’s investor conference call. A first-half slump is likely to lead to a V-shaped recovery in the second half, he said. So instead of a recession in 2023, TSMC will still see some growth.
This should come as a relief to investors. in 2022 the company allocated a record 36 billion an additional $1 billion a year will be added to research and development.
Another layer of protection against the vagaries of the global economy is the increasing adoption of artificial intelligence. For example, high-performance computing, which is used to crunch large numbers of cryptocurrencies, autonomous driving and artificial intelligence, has replaced smartphones as TSMC’s biggest source of revenue. And this sector (with the exception of cryptocurrency) is not slowing down.
The artificial intelligence race is heating up, with Microsoft Corp. preparing to bid $10 billion to acquire a stake in the owner of ChatGPT, and major suppliers such as Nvidia Corp. and Advanced Micro Devices Inc. on TSMC’s client list. Wei noted that this could be the sector that pushes the company past what would otherwise have been around 2023, and even hinted that an unspecified HPC customer will release a major new product in the second half of the year.
But TSMC may be one up front. Despite a year-over-year decline in revenue and shipments in the fourth quarter, the average silicon wafer price was able to increase by 5.8% in US dollar terms. That’s because customers have few other places to turn to if they want the best chips. Samsung Electronics Co. is the closest competitor, offering similar technology but without the scale to match the company’s boards.
There’s a good chance the wheels will fall off TSMC’s wagon one day, given the massive amounts of money it’s spending, and how much of that has to do with faith in a very uncertain future. But that day hasn’t come yet, and probably won’t for a while, because there’s still a product in the works that everyone desperately needs.
More from Bloomberg Opinion:
• The silicon fence around China is almost complete: Tim Culpan
• Forget What You Learned About Investing: Merryn Somerset Webb
• Honestly, it’s been an amazing year for the future of tech: Tim Culpan
This column does not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a columnist for Bloomberg Opinion covering technology in Asia. He was previously a technology reporter for Bloomberg News.
For more stories like this, visit bloomberg.com/opinion
