TSMC cuts capex by a quarter as growth slumps

In response to slumping chip demand, TSMC announced it's slashing its 2015 capital expenditure budget by over 25 percent to $8 billion. Earlier this year TSMC set its planned capex within a range of $10.5 billion and $11 billion but now the foundry plans to take advantage of capital efficiency gains and recent changes such as its conversion of existing capacity to finger geometries, as EE Times reports:

TSMC decided to cut its 2015 capex to take advantage of capital efficiency gains and recent changes such as its conversion of existing capacity to finer geometries, according to Chief Financial Officer Lora Ho. About a third of the budget cut is attributable to operating efficiency gains and another similar portion is a result of the conversion of 20nm capacity to 16nm, she said. TSMC’s 2016 capex is likely to increase from 2015, she added.

Still, some analysts expressed skepticism.

“TSMC cut capex quite substantially in three months,” said Goldman Sachs analyst Donald Lu at the TSMC event. “Efficiency gains and conversion, those things don’t seem like something you’d know about in the last three months.”

TSMC is continuing to drive an effort to improve capex efficiency, Ho responded.

The Taiwanese foundry foresees a slowdown in global demand and inventory reduction that will probably continue during the current quarter.

TSMC isn't the only major chip manufacturer making big cuts to its capex, earlier this week Intel made another cut to its 2015 capex, lowering it to $7.3 billion, plus or minus $500 million, versus an original estimate of $10 billion.