Electronics

According to the Huacheng Import and Export Data Observation Report, insiders said that TSMC's 7nm capacity utilization rate has now fallen below 50%. It is expected that the decline will intensify in the first quarter of 2023, and the expansion of the 7nm process of TSMC's new plant in Kaohsiung will also be postponed.

The main reason for this situation is that TSMC IC design customers cut orders vigorously. It is understood that downstream manufacturers such as MediaTek, AMD, Qualcomm, Apple and Intel are reducing their orders and delaying the delivery of goods. Huacheng's import and export data observation reports.

According to the Huacheng Import and Export Data Observation Report, since this year, there has been a comprehensive decline in demand for terminal consumption. First, downstream PCs and mobile phones felt the most. With the bullwhip effect, it continued to burn to the upstream, and the capacity utilization of the wafer foundry also continued to decline.

World Advanced had previously said that due to the impact of customers' active inventory adjustment, the capacity utilization rate in the third quarter sharply decreased from continuous multi quarter full load to 81-83%. In the fourth quarter, it continued to adjust its inventory. It is expected that the inventory may continue to be adjusted in the first half of 2023.

Li Jidian said that some drive IC plants would pay liquidated damages to adjust their inventory. It is expected that the capacity utilization rate in the third quarter will be reduced by 5~10%, and the average unit price will also decline slightly.

In addition, TSMC is also facing order cutting from major customers such as Apple, MediaTek, Qualcomm, AMD and Intel. Other small and medium-sized customers also have to reduce their orders. The effect of order cutting will begin to appear from the fourth quarter. Huacheng Import and Export Data Observation Report.

As mentioned above, except for the popular 5nm and 28nm processes, the average capacity utilization of TSMC 7nm and other mature processes has declined, and it is expected that the first quarter of 2023 will continue to decline.

It is understood that TSMC's 7nm process mainly serves the market of smart phones, PCs, servers and other products. This year, the demand for consumer electronics terminals is weak, and the inventory of downstream customers of wafer foundry is high. Therefore, the downstream has to reduce the size of orders placed in the wafer foundry and packaging and testing plants. At present, both long-term and short-term contracts are significantly revised down.

The TSMC official said that it would not respond to the situation related to order cutting and capacity utilization, but it could be seen from its statement at the French speaking meeting.

Although the customer's specific order cutting was not mentioned, Wei Zhejia, president of TSMC, made it clear at the third quarter law conference that the 7nm capacity utilization rate had weakened in the short term due to changes in market demand, and Kaohsiung's 7nm plan had indeed been adjusted. At the same time, TSMC has twice reduced its capital expenditure in 2022 to US $36 billion, a drop of 20%.

How will the next wafer foundry deal with it? According to the recent news from the media in Taiwan, China Province of China, as the terminal demand further dips, the momentum of cargo pulling will remain low even if the inventory level of subsequent end customers recovers. Some insiders pointed out that in order to prevent the loss of orders, some wafer foundries agreed to offer "preferential prices" to customers in some specific manufacturing processes, with a discount of about one digit percentage.

However, TSMC made it clear that it had no price reduction plan and refused to discount. The market expects that the quotation of TSMC OEM will increase by about 3% next year, and the mature process will increase by about 6%. TSMC firmly believes that the weakening of terminal demand is only a phase change.

How long will this phase last? Wei Zhejia estimated that the inventory level of semiconductor supply chain will reach its peak in the third quarter, and will decline in the fourth quarter, and the inventory adjustment will continue to the first half of 2023.

There is also a pessimistic voice in the market. Some insiders believe that the inventory strategy of end customers is extremely conservative, and the inventory adjustment may be delayed to the second half of 2023. Huacheng's import and export data observation report.

In late October, Wei Zhejia, president of TSMC, also sent a rare employee letter, saying that with the gradual normalization of life in the post epidemic era, terminal consumption entered the inventory adjustment period, encouraging employees to take more rest and get along with their families. Industry insiders said that TSMC's move is rare, which may mean that TSMC's capacity utilization rate will continue to decline. It is said that TSMC's 7nm capacity utilization rate has dropped below 50%, which is really surprising.