Both TSMC and United Microelectronics (UMC) missed first-quarter revenue targets set in January.
UMC's revenue ended a six-month streak of sequential revenue declines in March 2023. However, revenue for the first quarter declined 20.1% year on year to NT$54.21 billion (US$1.78 billion), falling just short of the foundry's projected 17-19% reduction in wafer shipments and flat ASP growth.
However, market observers attributed both UMC and TSMC's lower-than-expected first-quarter revenue to currency exchange fluctuations. TSMC stated that its revenue in US dollar terms actually met the low end of its guidance range of US$16.7-17.5 billion.
UMC's fabless customers, including Elan Microelectronics and China-based Vanchip, have preferred to be punished for breaching previously agreed-upon long-term contracts in order to stop producing losses as soon as possible, according to industry sources. End-market demand has been disappointing, resulting in excess inventories maintained by many IC design houses.
In addition, TSMC experienced continuous reductions in orders from big customers such as MediaTek and Apple, resulting in an unexpected widening of March revenue declines, the sources indicated. The top pure-play foundry missed its sales target for the first quarter.
Other customers, such as Sony and Broadcom, have also slowed down the pace of their orders, the sources said. TSMC may see its 7nm fab utilization fall below 40% throughout the first half of this year. Utilization rates for the foundry's 16/12nm and 28nm processes will also fall to 50% and 85-90%, respectively, in the second quarter, according to the sources.
In other news, market observers have differing perspectives on wafer foundries' long-term contracts with customers that are being terminated one after the other. On the plus side, foundries such as UMC and TSMC have reaped non-industry gains from customer termination fees in the short term. Long-term demand can still be expected after the supply chain has been de-stocked, and it will gradually return. However, some market observers are concerned that foundries' continued capacity expansions will result in a supply surplus if demand does not catch up.
