Export ban will define semiconductor sector in 2023

Following news that TSMC reported strong Q3 2022 results, GlobalData’s thematic research director, Josep Bori, offers his view: “TSMC’s strong Q3 2022 results could earn it the ‘last man standing’ moniker given the current sector backdrop. From the Intel and Nvidia profit warnings to more recent negative outlooks from Samsung, AMD, Kioxia and Micron, it is clear that semiconductor demand is losing momentum. Yet, TSMC managed to deliver growth and provide an outlook above market expectations.

“Despite management warnings of weakening end market demand and customers’ ongoing inventory adjustments, the company remains structurally very well positioned. Its advanced technologies (5 and 7nm nodes) accounted for 54 per cent of total wafer revenue, up from 51 per cent last quarter. This manufacturing technology leadership places TSMC front and center of any country’s artificial intelligence (AI) strategy, as advanced AI chips require this miniaturization level.

“The fundamental question in the coming months is how the likes of TSMC, Samsung and ASML will react to broader restrictions on the export of advanced chips and tools to China. Remaining neutral will become increasingly difficult for companies based in Taiwan, Korea, the Netherlands or Japan, despite the significant economic costs of not doing so.

“As the flare of geopolitical tension in early August following the visit to Taiwan of Nancy Pelosi demonstrated, the US export bans on chip technology transcends the semiconductor industry. In GlobalData’s view, this is about AI dominance, which underpins what many call the 5th industrial revolution and, ultimately, about global economic leadership in the next few decades.”