TSMC tells vendors to delay chip equipment deliveries: Sources

TOKYO/SINGAPORE/AMSTERDAM – Taiwan’s TSMC has told its major suppliers to delay the delivery of high-end chipmaking equipment, as the world’s top contract chipmaker grows increasingly nervous about customer demand, two sources familiar with the matter said.

The instruction by TSMC, which is grappling with delays at its US$40 billion (S$54.5 billion) chip factory in Arizona, is aimed at controlling costs and reflects the company’s growing caution about the outlook for demand, the sources said.

Suppliers currently expect the delay to be short-term, the sources said, declining to be named as the information is not public.

TSMC said it does not comment on “market rumours”.

The company referred Reuters to comments by chief executive officer C.C. Wei in July that weaker economic conditions, slower recovery in China and softer end-market demand is making customers more cautious and more mindful of controlling inventory.

Companies affected by the instruction to delay include Dutch firm ASML, which makes lithography equipment essential for high-end chipmaking, one of the sources said.

In an interview with Reuters last week, ASML chief executive Peter Wennink said some orders for its high-end tools have been pushed back, without naming customers, and that he expected it would be a “short-term management” issue.

ASML, Europe’s most valuable tech listed company, is operating at maximum capacity and overall sales are forecast to grow 30 per cent this year.

“We’ve had several (news) reports about fab readiness. Not only in Arizona… but also in Taiwan,” Mr Wennink told Reuters, referring to preparations for chip manufacturing.

TSMC has been forced to push back production at the Arizona plant by a year to 2025, as it struggled to recruit workers and faced pushback from unions on efforts to bring in workers from Taiwan.

“If you ship a lot of people from Taiwan to help build a factory in Arizona, they’re not working somewhere else. So this is kind of a double whammy,” Mr Wennink said.

TSMC chairman Mark Liu said last week there had been “tremendous” improvement at the Arizona site in the last five months.

Chip cycle worries

The Taiwanese chip giant is not alone in worrying a bounce back in demand may take longer than expected.

Apple, a key TSMC customer, launched a new series of iPhones this week that included a faster chip, but it did not raise prices, reflecting the global smartphone slump.

Media reports that Beijing has ordered some government employees to stop using iPhones at work, and the launch by tech firm Huawei of a flagship phone using Chinese-made chips, is causing further unease at TSMC, one of the sources said.