Facing a sharp drop in revenue, Taiwanese semiconductor giant TSMC is seeking assurances from the US about subsidies it will receive when it builds its new $40 billion manufacturing facilities in Arizona.
TSMC’s US investments are part of the chipmaker’s strategic move to expand beyond Taiwan, due to the country’s own political tensions with China, as well as the onoing US chip trade war with China, which is putting companies globally in the crosshairs.
Trade tensions are coming at a time when chip makers find themselves in a market environment that features substantially weakened demand compared to past years.
TSMC itself saw net revenue drop by more than 15% on a year-on-year basis in March, according to a preliminary revenue report issued Monday.
While March 2022 saw TSMC’s net revenue top $5.6 billion, March 2023’s figures dropped to $4.7 billion, which was a sharp decrease even in month-to-month terms. (February saw TSMC’s revenues reach $5.3 billion.)
The numbers are better for TSMC when viewed on a quarterly basis — the company posted a 3.6% net revenue increase in the first quarter of 2023, for a total of $16.6 billion, compared to last year’s figure of $16.1 billion.
PC shipments drop as pandemic surge subsides
The recent decline is likely tied to the sharp drop in demand for end-user devices. Worldwide shipments of traditional PCs dropped by 29% in the quarter compared to a year before, to a total of 56.9 million, according to a report issued today by IDC. Researchers for IDC expect sales to continue to suffer in the near term — thanks to the pandemic-fueled spike in demand finally petering out — but said that normal refresh cycles could begin to take hold again in 2024, revitalising the market.
Yet even that is far from a certainty, warned IDC devices and displays research vice president Linn Huang.
“If the economy is trending upward by then, we expect significant market upside as consumers look to refresh, schools seek to replace worn-down Chromebooks, and businesses move to Windows 11,” Huang said, in the report. “If recession in key markets drags on into next year, recovery could be a slog.”
TSMC’s down numbers are not an aberration for the silicon market, as other chipmakers, including Samsung, have reported shrinking revenue. Meanwhile companies like TSMC and Samsung are being heavily incentivised to produce their more advanced chips in the US, thanks to new laws like the CHIPS and Science Act.
That pressure has caused additional anxieties for overseas chipmakers, who will have to adhere to a broad set of US guidelines for semiconductor makers seeking CHIPS Act funds. Some of the conditions showed the administration’s social and economic priorities, including for a diverse workforce.
In addition, there are concerns about the idea of clawbacks of excess profits that could be owed to the government via its “upside sharing” provisions, as well as worries over confidential business information being kept secret, according to a Reuters report.
Taiwan Economy Minister Wang Mei-hua told reporters on Monday that TSMC was talking to the US about the details of the CHIPS Act subsidies, Reuters reported, which added that it received a statement from TSMC that confirmed the talks.
"We can confirm that we are communicating with the U.S. government about the CHIPS Act guidance," according to the TSMC statement.