Semiconductor Industry Faces Slowdown as TSMC Lowers Growth Forecast

TSMC founder Maurice Chang (left), known as the ‘father of Taiwan’s semiconductor industry’, received the Sun Yat-Sen Medal, Taiwan’s highest civilian decoration, on the 19th. Taiwan President Tsai Ing-wen and founder Chang toast at the medal award ceremony held at the Presidential Palace in Taipei on this day. Reuters Yonhap News There are growing forecasts that foundry growth (production of semiconductor shipments) will be less than expected. Following a delay of more than a year by Samsung Electronics to operate its new foundry plant in the US, Taiwan’s TSMC also lowered its forecast for the foundry’s growth rate this year. This is because demand for replacements for cars, smartphones and personal computers, with the exception of artificial intelligence (AI), has stagnated.

TSMC, the world’s leading foundry company, lowered this year’s foundry growth rate from ‘around 20%’ to ‘mid to high 10%’ in a conference call (performance briefing) held on the 18th. The growth rate forecast for the entire semiconductor sector, excluding memory semiconductors, was also reduced from ‘more than 10%’ to ‘around 10%’. TSMC CEO Wayser explained, “Macroeconomic and geopolitical uncertainty (war, high interest rates, etc.) is putting a strain on consumer sentiment and demand for terminal semiconductors.”

Signs of a slowdown in the industry are also being confirmed in the semiconductor equipment market. New orders for Dutch ASML’s extreme ultraviolet (EUV) lithography equipment, considered essential equipment for foundries, plunged 88.4% from EUR 5.6 billion in the fourth quarter of last year to EUR 650 million in the first quarter of this year.

As foundry factories are built simultaneously in the US and Japan, concerns about oversupply are growing. Reflecting this, Samsung Electronics delayed mass production of the foundry line being built in Taylor, Texas, by more than a year from late 2024 to 2026.

TSMC’s stock price fell 6.72% on the Taiwan stock market today due to concerns about a slowdown in the semiconductor industry. SK Hynix (-4.94%) and Samsung Electronics (-2.51%) also fell.

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Over the past few months, the outlook for the foundry industry has been ‘amazing’. As the artificial intelligence (AI) market opens up, orders for AI semiconductors such as graphics processing units (GPUs) are exploding. The fact that TSMC, the world’s No. 1 company, said in January that “the foundry market will grow by 20% this year” also added strength to this outlook. It has been said that the ‘super boom’ of 2020-2022, which grew at an average of 26% per year due to a shortage of semiconductor supply, could be repeated.

The atmosphere changed completely in three months. AI is still booming, but orders for chips for smartphones, cars and PCs are falling short of expectations. Foundry companies are adjusting their medium to long-term production strategies by reducing investment in equipment and delaying the start-up of new lines.

○ TSMC forecast lowered

It was TSMC that sparked concerns about a slowdown in the foundry industry. This is because the foundry’s growth rate this year, which was set at ‘around 20%’ in the conference call (performance briefing) on ​​the 18th, has been reduced to ‘mid to high 10%’. The market was shocked by the revision predicted by TSMC, which accounts for more than 60% of the global foundry market. On this day, semiconductor stocks fell sharply in the stock markets of the major countries.

Meanwhile, signs of a slowdown in the industry for ‘legacy foundries’ of 10 nanometers (nm·1nm = 1 billionth of a meter) or more have been found everywhere. This is because orders for automotive chips using legacy processes have fallen as the rapid growth of electric vehicles has slowed. As Chinese foundry companies with a high proportion of legacy processes have launched low-price offensives in response to falling demand, profitability has also grown. The operating rate of domestic legacy foundry companies such as DB HiTek and SK Key Foundry, which had reached 100% in 2021, has recently dropped to around 70%.

The slowdown in the industry that started with legacy foundries now appears to be transferring to cutting edge processes. As the number of advanced chips ordered by Apple and others has fallen, the share of sales accounted for by TSMC’s advanced process (3nm) has fallen from 15% in the fourth quarter of last year to 9% in the first quarter. this year. TSMC also recognizes this. It has been said that orders in areas other than AI are not improving. TSMC CEO Wayzer said, “The smartphone market is showing a gradual recovery, and the PC recovery is slow,” and “The overall server market is not improving and auto inventory continues to increase. “

○ Concerns about oversupply

Growing global economic uncertainty is also a negative factor for the foundry industry. Following the war between Russia and Ukraine, Iran and Israel are also facing all-out war. It seems that the high interest rates in the United States, which have a negative effect on the global consumer market, are extending.

Concerns about oversupply are also growing. TSMC has decided to build four additional state-of-the-art factories in the United States and Japan, and Samsung Electronics and Intel will also build two or more new foundry factories each in the United States. Japanese foundry company Lapidus is also building a factory in Hokkaido. Around 10 new foundry factories will be created over the next five years.

Foundry companies such as TSMC and Samsung Electronics are preparing for a slowdown in the industry by reducing new investments. This can be confirmed by the fact that new orders for the Dutch ASML’s extreme ultraviolet (EUV) exposure equipment, essential equipment for foundries, fell by 88.4% from 5.6 billion euros in the fourth quarter of last year to 656 million euros in the first quarter. this year.

Correspondent Hwang Jeong-su hjs@hankyung.com

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