It has also said that it could slash annual investment as it now expects softer demand due to a slowing global economy.
These warnings come despite the company reporting a solid 78 per cent jump in fourth-quarter profit, but they certainly highlight the sharp slowdown being seen across the technology sector which is being driven by weaker consumer demand caused by a combination of rising inflation, interest rates and an expected economic downturn.
Despite the challenging environment, TSMC suggested that growth would return in the second half of this year.
"We forecast the semiconductor cycle to bottom sometime in first half and see a recovery in second half 2023," said CEO C.C. Wei. He suggested that the rebound would be boosted by new product launches such as artificial intelligence-enabled goods.
According to TSMC its capital expenditure in 2023 will decrease to $32-36 billion from $36.3 billion in 2022.
First-quarter revenue is expected in a range of $16.7 billion to $17.5 billion, a modest decline, when compared with $17.57 billion this time last year.
TSMC has been somewhat shielded from the downturn as its focus is on more advanced chips for high-end customers such as Apple.
Even so, it is expected to be affected by the deepening slowdown, with the current quarter likely to mark its first sales drop in four years.
TSMC continues to benefit from "mega-trends" for high-performance computing chips for 5G networks and data centres, as well as increased use of chips in gadgets and vehicles.
Accordingly, it plans to ramp up production outside Taiwan, and it expected at least one-fifth of its 28 nanometre (nm) and more advanced node capacity, which accounted for most of the company's revenue in 2022, could be overseas "within five years or more."
TSMC has already started building a second chip factory in the US, and is considering building a second one in Japan, while it is evaluating the possibility of a fab in Europe.
