TSMC 2024 Capital: Potential Drop to $28B

On December 5th, there have been circulating market speculations suggesting a potential reduction in the capital expenditure by Taiwan Semiconductor Manufacturing Company (TSMC) for the upcoming year. It is rumored that the capital expenditure might decrease to a range of $28 billion to $30 billion, representing a decline of 6.3% to 12.5% compared to the current year. These speculations stem from the shared utilization of specific processing equipment and the activation of deferred budgets in the present fiscal period.

Insiders within the electronics components industry indicate that the anticipated reduction in capital expenditure may impact semiconductor equipment orders. Approximately 80% of the machinery used in TSMC's advanced 3nm processing is believed to be interchangeable with that of 5nm and 7nm.

Industry experts suggest that TSMC's emphasis on research and development investment in advanced processing will continue to grow in the coming year. However, the expected capital expenditure for the upcoming year is anticipated to focus predominantly on investments in advanced processing below 3nm and 2nm, as well as photomask investments. This strategic focus aligns with the transitional phase in 7nm production capacity utilization.

Should TSMC's capital expenditure for the upcoming year indeed be lower than the current fiscal year, secondary equipment manufacturers may encounter financial constraints, necessitating prudent budgetary measures. Additionally, key partners in the semiconductor industry may need to adjust their strategies in response to the cyclical nature of the semiconductor market.

Responding to speculations about a potential reduction in next year's capital expenditure, TSMC officially stated on December 4th that precise information regarding next year's capital expenditure will be disclosed during the January 2024 investor conference. Despite the potential decrease in capital expenditure, expectations persist that TSMC's commitment to research and development investments in advanced processing technologies will remain steadfast.

During the October investor conference, TSMC had already adopted a cautious stance in response to short-term market uncertainties, maintaining the current year's capital expenditure at approximately $32 billion, reflecting a judicious contraction.

In a related development, ASML, the global leader in photolithography technology, foresees 2024 as a transitional year, expecting revenue levels similar to those of 2023. This outlook is based on the semiconductor industry navigating a bottoming-out phase in its cyclicality, prompting a conservative approach.

According to TSMC's statistical data, the capital expenditure in the third quarter of this year amounted to approximately $7.1 billion, marking a continued decline from $8.17 billion in the second quarter and $9.94 billion in the first quarter. The cumulative capital expenditure for the first three quarters totaled $25.21 billion. If the capital expenditure for the current fiscal year attains the lower estimate of $32 billion, this implies a corresponding decrease in capital expenditure for the current quarter to $6.79 billion.