Chip manufacturer TSMC sees a declining utilization in 6nm and 7nm processes as people buy fewer smartphones and PCs amid a global economic slowdown. It expects to cut utilization of certain chips in the next three quarters.

Why it matters: The market downturn will not see a recovery in the next six to nine months due to the “gloomy economic outlook,” according to market analysis firm Canalys. Chip contractors like TSMC, which had a high capacity utilization rate, now face vacancies in certain tech nodes.

  • Such issues could worsen the situation for TSMC, which is already facing the loss of orders from mainland China due to the latest US chip export controls. For example, Biren’s BR100 GPU has adopted TSMC’s 7nm process, but the chipmaker has put its work with the firm on hold due to the ban.
  • In more positive news, the development could help to relieve chip shortages in other fields such as gaming consoles. Steam Deck, Xbox Series X, and Playstation 5 all use AMD customized processors built with TSMC’s 7nm tech.

Details: TSMC released its financial results for the third quarter of this year on Oct. 13 and gave conservative guidance of 0.4% quarterly revenue growth for the next quarter. The company also said its 6nm and 7nm production could remain affected until next year.

  • C. C. Wei, TSMC’s CEO of the firm, stated that the firm’s 7nm production capacity utilization was affected as a result of the weak demands of personal computers and smartphones and semiconductor inventory adjustments, which will be relieved in the second half of 2023.
  • 6nm and 7nm nodes comprised 26% of TSMC’s revenues in the third quarter of 2022, according to a report from Counterpoint. Smartphones and high-performance computing (HPC) devices, like CPU and GPU for PCs and servers, made up 32% and 38% of TSMC’s total wafer shipment volume in 2022, respectively.
  • The report also pointed out that “the global foundry industry’s utilization rate has reached its peak level in mid-2022 [and] the downtick will bring down business in all aspects in the next few quarters before any signs of improvement emerge in inventory levels across the semiconductor supply chain.” 
  • TSMC’s utilization rate of 6nm and 7nm could drop to 80% to 90% in the next three quarters, and it would be unlikely to recover until clients such as Intel deliver more orders.
  • Counterpoint’s report does however agree with TSMC that there could be “positive drivers” via new products such as Wi-Fi, radio-frequency (RF), and solid-state drive controller chips migrating onto 6nm or 7nm when the inventory cycle ends in 2023.

Context: TSMC is a top chipmaker worldwide, dominating 56% of the market by revenue in the second quarter of this year, according to Counterpoint. The chipmaker generated a revenue of $20.23 billion for the third quarter this year, a yearly growth rate of 35.9%.

  • 7nm and 6nm are important tech nodes, contributing 17% of the global chip foundry revenues in the second quarter of 2022.

Ward Zhou is a tech reporter based in Shanghai. He covers stories about industry of digital content, hardware, and anything geek. Reach him via ward.zhou[a] or Twitter @zhounanyu.