Taiwan Semiconductor GiantTSMCtoday announced its financial results for the first quarter of 2023. For the quarter, the company reported consolidated revenue of NT$508.63 billion, net income of NT$206.9 billion, gross profit margin of NT$56.31, operating profit margin of NT$45.51, after-tax net income margin of NT$40.71, and EPS of NT$7.98. The report outperformed market expectations, with gross profit margin holding steady at the long-term target of NT$531 billion. The report outperformed market expectations, with gross margins holding steady at the long-term target of 53%. In addition, the company's capital expenditures remained unadjusted at $32-36 billion, as TSMC believes this is necessary for long-term structural market demand.

However, TSMC is also concerned that fabless semiconductor inventory adjustments may continue into the third quarter before rebalancing. As a result, the company has lowered its expectations for semiconductor industry, foundry and full-year in-house dollar revenue for this year. For the second quarter outlook, TSMC estimates that revenue will decline by about 6.7%, and this is in line with the corporation's expectations. However, President Chieh-Chia Wei also said that the first half of 2023 fabless semiconductor inventory adjustment will take longer than previously expected and may continue into the third quarter.

TSMC further noted that the company's 5nm shipments accounted for 31% of wafer sales in Q1 2023, while 7nm shipments accounted for 20% of full-quarter wafer sales. in total, revenue from advanced processes, including 7nm and more advanced processes, amounted to 51% of full-quarter wafer sales.

Ji-Pu Viewpoint

A number of foreign investors have estimated that TSMC's 2023 revenue will decline between 2% and 8%, which is in line with TSMC's own downwardly revised expectations and represents a less-than-expected recovery in the current economic climate. In addition, TSMC has not revised down its capital expenditure for 2023, but still maintains it at USD32~36B, which we interpret may have two implications, firstly, it represents the optimism on the demand for N3 series and N2 in the next two years. In addition, Samsung, our advanced process foundry rival, has not reduced its capital expenditure, so maintaining capital expenditure in this competitive era may be a choice of last resort.