Falling demand for hardware hits TSMC as Nvidia, AMD, others slash orders

[Daniel Sims]

Cutting corners: The Taiwan semiconductor giant seemed to dodge the general malaise in the global tech sector throughout 2022, but falling consumer demand and other macroeconomic factors are finally catching up to it. However, analysts currently expect the company's fortunes to start turning around later in 2023.

TSMC's financials in the fourth quarter of 2022 and the first quarter of 2023 are expected to show a decline with the company is reportedly renegotiating contracts as AMD, Nvidia, and MediaTek cut orders due to falling demand for their products.

Sources have told DigiTimes that the utilization rates for TMSC 7nm and 6nm fabs are expected to fall to 50 percent as clients order fewer wafers. The 28nm fabs that remain at capacity as of Q3 2022 will also start to slow down heading into 2023. The company is expected to post a 15 percent quarter-over-quarter revenue drop in Q1 and another decline in Q2 as its inventories grow.

Conditions may start improving around the middle of next year as TSMC ramps up 3nm N3 production, which starts this week. Apple will be the main customer for 3nm as another iPhone could help lift TSMC's revenue.

While many other industry actors suffered from a slowing global economy, TSMC posted 50 percent revenue growth year-over-year, partly thanks to Apple after supplying them with the A16 processor used in the iPhone 14. The Cupertino giant will again rely on TSMC for the iPhone 15's 3nm-based chip in 2023.

Moreover, Apple agreed to pay 20 percent more for TSMC's 3nm wafers than it did for 5nm. The Taiwan company will start charging $20,000 per N3 wafer due to equipment costs. Samsung already manufactures 3nm semiconductors, but yield problems forced clients like Qualcomm to switch to TSMC.

The headwinds TSMC will face in the first half of next year stem from falling demand for products like PCs, graphics cards, tablets, and smartphones as Western countries endure an economic downturn. Additionally, looming Covid waves in China could disrupt manufacturing.

Desktop graphics cards have been particularly hit hard, with one recent analysis showing sales reaching their lowest point since 2005. High prices and the crypto mining crash are the biggest culprits.

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https://www.techspot.com/news/97126-falling-demand-hardware-hits-tsmc-major-companies-slash.html

 

[NintPlayBox]

We will soon see the discounts the Nvidia CEO at one point said it wouldn't happen....lol

 

[Inthenstus]

Prices are to damn high, or I’d buy

 

[pcmedic2]

Agree, the entire PC industry has pushed their pricing WAY beyond the acceptable limit in my opinion. I understand prices go up over time, but when GPU's and CPU's cost more than you could build and entire system for a few years ago then it is out of hand. Especially considering TSMC just announced revenue increase of 50% !

 

[Superconductor]

Woke Broke

 

[sreams]

Agree, the entire PC industry has pushed their pricing WAY beyond the acceptable limit in my opinion. I understand prices go up over time, but when GPU's and CPU's cost more than you could build and entire system for a few years ago then it is out of hand. Especially considering TSMC just announced revenue increase of 50% !

To be fair... revenue does not equal profit. A company can technically increase revenue by 1000% and not see a dime of additional profit.

 

[passwordistaco]

I hope they don't cut any of their expansion plans.

 

[mrvco]

Who could possibly have predicted that higher prices would result in reduced demand. Sounds a bit like something my economics professors from college would say while pointing to fancy diagrams.

 

[Dimitrios]

The economy is in the toilet. I bet If you ask many folks off the streets they will tell you they need every dollar to make sure they have food & heat & filling up their gas tank. Thank the greedy crooked politicians not just in the USA but around the world. Cough cough 2-3 more leaders that I won't say.

 

[rmcrys]

The economy is in the toilet. I bet If you ask many folks off the streets they will tell you they need every dollar to make sure they have food & heat & filling up their gas tank. Thank the greedy crooked politicians not just in the USA but around the world. Cough cough 2-3 more leaders that I won't say.

That issue is not new. The last crisis was possible because leaders and politicians allowed that banks and so one did what they wanted and finally, the common worker lost their savings, acquiring power and jobs. Banks were given state money, countries got money with very high interests which made mega rich investors from the IMF, etc...

Now the same: some leaders and many politicians just make the work hard again. What about cutting those leaders and show them the door (of the prison)? OK . That will never happen...

 

[kiwigraeme]

We really need to know the story for all these new plants planned on being built

The capacity answer never really made sense - with out covid and a bit more success at Samsung - we have enough for many devices.

So we have
less dependency on Taiwan - and stability from attacks from China.

need for 3nm and smaller ability factories .

Basically a free gift - as resident countries pay for build with subsidies and tax breaks.

predicted increase in new uses for chips - AI , robots whatever

Buying goodwill with E.U and USA
Corruption FIFA style

maybe to lessen/dominate competitors -Samsung , Intel - so most 3rd parties use them - why use them if TSMC has so many options for you?

Stability from environment - earthquakes, drought , typhoons etc

That Asia countries like revenue and jobs - and profit though liked is less important than in USA

But yeah so many new planned announcements seemed weird - who knows why ?

 

[Kwesley]

We really need to know the story for all these new plants planned on being built

The capacity answer never really made sense - with out covid and a bit more success at Samsung - we have enough for many devices.

So we have
less dependency on Taiwan - and stability from attacks from China.

need for 3nm and smaller ability factories .

Basically a free gift - as resident countries pay for build with subsidies and tax breaks.

predicted increase in new uses for chips - AI , robots whatever

Buying goodwill with E.U and USA
Corruption FIFA style

maybe to lessen/dominate competitors -Samsung , Intel - so most 3rd parties use them - why use them if TSMC has so many options for you?

Stability from environment - earthquakes, drought , typhoons etc

That Asia countries like revenue and jobs - and profit though liked is less important than in USA

But yeah so many new planned announcements seemed weird - who knows why ?

Lol I apologize for this. But wtf did I just read?

 

[Eldritch]

To understand the magnitude, Nvidia shares were $300+ on January 2022.
Now they are $146 each in January 2023.
Similarly, AMD fell from $150 to $65.
This is an massive decrease and doesn't even look like it has bottomed out yet I.e it's likely to fall farther down.

Point is, whether it's Red or Green both are just greedy companies who got carried away by buoyant market and started thinking they can charge whatever they want hence the nonsensical generation of Graphics Cards.
On social media people tend to post their high end machines to show off, creating the illusion that everyone is buying these overpriced products but reality is not consonant to this illusion.

Keep voting with your wallets and the CEOs themselves will change if they don't learn the lesson soon.

 

[kiwigraeme]

Lol I apologize for this. But wtf did I just read?

No worries - just my stream of consciousness why these companies building so many new plants in a boom and bust like industry - see Dram/memory for even more dramatic price swings - new one in Europe , new one in Texas etc .
On the face of it for supply doesn't make sense

 

[Biostud]

When they have no products on the shelves worth buying, how do they expect to grow a demand? (no 7900XTX, N32 or zen4 3D cache)

 

[Srksi]

Well, what you'd expect when low end cards cost like high end cards 15 years ago, and high end cards cost like used cars!

 

[pcmedic2]

To be fair... revenue does not equal profit. A company can technically increase revenue by 1000% and not see a dime of additional profit.

Guess I should have specified that was NET revenue.
Regarding your scenario, if a company sees 1000% revenue increase (Gross) and not a dime profit, I would suggest they replace upper management!

 

[sreams]

Guess I should have specified that was NET revenue.
Regarding your scenario, if a company sees 1000% revenue increase (Gross) and not a dime profit, I would suggest they replace upper management!

Not necessarily if they are investing heavily in growth.

 

[Hooda Thunkett]

Woke Broke

Woke up broke.

 

[Hooda Thunkett]

Well, what you'd expect when low end cards cost like high end cards 15 years ago, and high end cards cost like used cars!

And used cars cost like new cars!

 

[Jroc187]

That issue is not new. The last crisis was possible because leaders and politicians allowed that banks and so one did what they wanted and finally, the common worker lost their savings, acquiring power and jobs. Banks were given state money, countries got money with very high interests which made mega rich investors from the IMF, etc...

Now the same: some leaders and many politicians just make the work hard again. What about cutting those leaders and show them the door (of the prison)? OK . That will never happen...

Sir the government starting with Bill Clinton said housing was a rite so they allowed the banking industry to give out reckless loans to everyone that could not afford them and sed we would back back the loans if is all came crashing down. well 2008 bailouts were that thing

 

[loki1944]

Ridiculous prices+unecessary cards+bad economy

 

[passingposeidon]

And used cars cost like new cars!

For real, the car market is crazy.

 

[3ogdy]

Sure. Keep them prices up and make sure we need to spend more with each new generation released.

At some point, even enthusiasts will stop buying based on performance and will buy based on price point.
A hard line needs to be drawn somewhere.

 

[loki1944]

Sure. Keep them prices up and make sure we need to spend more with each new generation released.

At some point, even enthusiasts will stop buying based on performance and will buy based on price point.
A hard line needs to be drawn somewhere.

Well said.