TSMC warns the tech sector by cutting capital spending by 10%

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  • Shares of Taiwan Semiconductor Manufacturing Co., Ltd. posted their biggest gain in three months after the company lowered its 2022 investment target by about 10% and reported better-than-expected earnings. TSMC expects to spend about $36 billion on capital goods in 2022, up from at least $40 billion previously. The company, which reported a higher-than-expected third-quarter net profit of NT$280.9 billion (US$8.8 billion), is forecasting revenue of US$20.7 billion from US$19.9 billion. Hopes for the temporary Asian currency are weakening.

The Asian semiconductor sector as a whole rose after U.S. peers rallied on rising U.S. inflation data. The Bloomberg Asia Pacific Semiconductors Index rose a whopping 3.6% while the Philadelphia Semiconductors Index closed 2.9% higher. TSMC shares rose 4.3% in Taipei on Friday.

“Now is the time to start buying TSMC shares for absolute gains,” said a JPMorgan analyst after TSMC’s rally. Stocks plunged early in the week, with market capitalization down to around $320 billion from more than $550 billion in January.

TSMC and its competitors are suffering from widespread Washington restrictions on doing business with China that are shocking the global semiconductor industry. Applied Materials, a major maker of chip-making equipment, cut its guidance for the fourth quarter, while Intel . We need to prepare to lay off thousands. European gear maker ASML Holding NV, whose main customer is TSMC, fell as much as 3% on Thursday.

“The company’s 10% cut in its full-year investment target suggests continued weakness in demand for smartphones and PC chips,” said Charles Shum, an analyst at Bloomberg Intelligence. Management has been licensed by the United States to continue operating and expanding its 16-nanometer and 28-nanometer lines in Nanjing, China, with companies from SK Hynix Inc. to Samsung Electronics Co. said it has secured a small exemption from tipping. limit .

The move announced last week is the most aggressive yet by the Biden administration in trying to block the development of technological capabilities China sees as a threat. The move, which has enraged Beijing, threatens to disrupt a global economy already grappling with a potential global recession, rising inflation and ongoing supply shortages.

The grant will allow his three largest semiconductor manufacturers in Asia to buy, import, upgrade, and more U.S. tools and maintain their existing facilities and operations in the world’s largest semiconductor market. You may also be permitted to expand an existing facility covered by your license. In the case of TSMC, this affects more mature nodes that are several generations behind the latest technology.

However, it is unclear whether foreign companies will be allowed to climb the technology ladder or whether American employees will work for the Chinese line.

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