The long-term outlook for the semiconductor market remains strong

The long-term outlook for the semiconductor industry is strong, despite short-term fluctuations in demand. To address the chip shortage, the industry has been investing heavily in increasing chip production capacity. For example, TSMC invested 1.1191 trillion New Taiwan Dollars (approximately $39 billion USD) in 2022, and is expected to invest $32-36 billion USD in new facilities and operations in 2023. The global semiconductor market experienced significant ups and downs in 2022, with record-high sales figures early in the year followed by a period of cyclical downturn. However, the long-term outlook for the industry remains strong due to the growing demand for chips in making the world more intelligent, efficient, and interconnected.

 

Sales of consumer electronics have decreased significantly, particularly for smartphones, tablets, and laptops, leading to a decline in demand for advanced semiconductors. Large suppliers have either delayed the launch of new models or released only a few new products, rather than dozens.

 

There are reports that TSMC has started quoting higher prices for its US factory than its Taiwan factory, by 20-30%, due to its desire to maintain its 53% gross margin. TSMC is reportedly passing on the increased manufacturing costs to its customers. The Taiwanese government has also provided TSMC with special tax breaks and low-cost financing to ensure that the latest semiconductor manufacturing technology remains in Taiwan.

 

During the Q1 2023 earnings call, TSMC admitted that Apple received special treatment. Apple is often the first company to use TSMC's advanced process nodes and is willing to pay extra fees and take on additional risk. Since Apple stopped using Intel CPUs in its Mac and MacBook series, all of its internally designed processors have been manufactured by TSMC, accounting for about 25% of TSMC's total revenue.