The logo of Taiwanese chip giant TSMC, in Tainan, Taiwan, on Dec. 29, 2022.ANN WANG/Reuters
Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world’s largest contract chip maker, bet on sustaining its strong growth, after reporting on Thursday a forecast-beating 54 per cent jump in quarterly profit driven by soaring demand for chips used in artificial intelligence (AI).
TMSC, the dominant producer of advanced chips used in AI applications whose customers include Apple Inc. and Nvidia Corp., has benefited from a surge toward AI across a spectrum of industries.
TSMC estimated its capital spending in the current quarter would more than double to around US$11.5-billion and that the budget was likely to increase further next year, as it expects healthy demand for its products.
It said 2024 full-year revenue will grow close to 30 per cent in U.S. dollar terms, compared to a previous guidance of slightly above the mid-20 per cent range.
TSMC said revenue from AI processors is set to account for mid-teens percentage of its overall revenue this year.
“The demand is real,” Chairman and CEO C.C. Wei told an earnings call, referring to AI and adding it would last for many years.
Shares of U.S. chip makers such as AI processor leader Nvidia and rival Advanced Micro Devices Inc. rose more than 2.5 per cent in premarket trading. Broadcom Corp., Micron Technology Inc., Intel Corp. and Qualcomm Inc. shares were up between 1.5 per cent and 3 per cent.
U.S.-listed TSMC shares gained more than 8 per cent, with the company’s market capitalization set to cross US$1-trillion if premarket gains hold.
At its quarterly earnings call on Thursday, TSMC said it expects capital expenditure for this year at slightly higher than US$30-billion, compared with a previous forecast of US$30-billion-US$32-billion, as it races to expand production.
Capital expenditure for 2025 was likely to be higher than this year, TSMC said, although it did not provide a figure.
It said next year looks to be “healthy,” and forecast a similar outlook for the next five years.
Piter Yang, a fund manager of Fuh Hwa Securities Investment Trust, said TSMC’s results had wiped away concerns about the industry that had been sparked by ASML’s earnings.
“TSMC is a dominant company,” he said. “It is the only one with advanced process technologies that won’t be found at companies like Intel or Samsung.”
TSMC is spending tens of billions of dollars building new factories overseas, including US$65-billion on three plants in the U.S. state of Arizona, though it has said most manufacturing will remain in Taiwan.
It said on Thursday it expects its first fab in Arizona to see volume production in 2025, while its second fab there should start volume production in 2028. It forecasts the third Arizona fab to begin volume production by the end of the decade.
The Taiwan chip maker said it expected fourth-quarter revenue of US$26.1-billion-US$26.9-billion, up from US$19.62-billion in the same period of 2023.
The bellwether for the chip industry reported earlier on Thursday a net profit of T$325.3-billion (US$10.11-billion) for the quarter ended Sept. 30, its highest for any quarter, compared with the T$300.2-billion predicted by an LSEG SmartEstimate drawn from 22 analysts. SmartEstimates give greater weighting to forecasts from analysts who are more consistently accurate.
TSMC, Asia’s most valuable publicly listed company, said third-quarter revenue rose 36 per cent year-on-year to US$23.5-billion, better than the company’s previous forecast of US$22.4-billion to US$23.2-billion. The company last week announced third-quarter revenue in Taiwan dollars, coming in at T$759.69-billion.
“Our business in the third quarter was supported by strong smartphone and AI-related demand for our industry-leading 3nm and 5nm technologies,” Wendell Huang, TSMC’s CFO, told an earnings call. “Moving into the fourth quarter of 2024, we expect our business to continue to be supported by strong demand for our leading-edge process technologies.”
The second half of the year is traditionally the peak season for Taiwanese tech companies as they race to supply customers ahead of the year-end holiday season in major Western markets.
Capital expenditure in the third quarter was US$6.4-billion, TSMC said, compared with US$6.36-billion in the second quarter.
The AI boom has helped drive up TSMC shares, with its Taipei-listed stock leaping 75 per cent so far this year, compared with a 28-per-cent gain for the broader market, giving the company a market capitalization of around US$840-billion.
TSMC, colloquially referred to in Taiwan as the “sacred mountain protecting the country” for its critical role in Taiwan’s export-dependent economy, faces little competition, though both Intel and Samsung Electronics Co. Ltd. are trying to challenge its dominance.
