The logo of Taiwan Semiconductor Manufacturing Company (TSMC) during the opening ceremony of the TSMC Global Research and Development Center in Hsinchu on July 28, 2023. (Photo by Amber Wang/AFP)
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Taiwan Semiconductor Manufacturing Company on Thursday exceed revenue and profit expectations in the first quarter, driven by continued strong demand for advanced chips, especially those used in artificial intelligence applications.
Here are TSMC’s first-quarter results compared to LSEG consensus estimates:
- Net income: NT$592.64 billion ($18.87 billion) versus the expected NT$582.94 billion.
- Net profit: NT$225.49 billion vs. expected NT$213.59 billion
TSMC said net revenue rose 16.5% year-on-year to NT$592.64 billion and net profit increased 8.9% year-on-year to NT$225.49 billion. Firm estimated revenue in the first quarter will range from 18 to 18.8 billion dollars.
TSMC is the world’s largest manufacturer of advanced processors and counts companies such as Nvidia and Apple as its clients.
“We expect our business to be supported in the second quarter of 2024 by strong demand for industry-leading 3nm and 5nm technologies, partially offset by ongoing smartphone seasonality,” Chief Financial Officer Wendell Huang said during the company’s conference call Thursday. .
CEO CC Wei said TSMC expects 2024 to be a year of “healthy” growth, supported by “our technology leadership and broader customer base.”
“Nearly all AI innovators are working with TSMC to meet the insatiable AI demand for energy-efficient computing power,” Wei said, adding that the company estimates revenue from AI server processors will “more than double this year”.
TSMC expects second-quarter revenue to be between $19.6 billion and $20.4 billion.
TSMC currently produces 3nm chips and plans to begin mass production of 2nm chips in 2025. Typically, smaller nanometer sizes result in more powerful and efficient chips.
Strong demand for artificial intelligence chips, fueled by the proliferation of large language models such as ChatGPT and Chinese clones, has driven TSMC shares up 56% over the past year.
“TSMC is well positioned for strong performance based on key industry trends. Continued demand for advanced chips, especially those used in artificial intelligence applications, is a positive sign in both the short and long term. The focus on developing cutting-edge chips such as the move to 3nm technology is another factor driving TSMC’s long-term growth,” Brady Wang, deputy director of Counterpoint Research, said Monday ahead of the results.
TSMC accounted for 61% of global foundry revenue. in the fourth quarter, according to Counterpoint Research. Samsung Foundry took second place with 14% of the market.
“TSMC’s net margin continues to be one of the highest in the company’s history at 40% compared to the industry average of 14%, demonstrating TSMC’s strong competitive position. The high margins are the result of an increasing share of sales of 7nm and smaller chips, which have significantly higher margins,” Grzegorz Drozdz, market analyst at Conotoxia, said last week.
Last year, TSMC’s business was impacted by macroeconomic difficulties and inventory adjustments. Smartphone and PC makers stockpiled chips during the pandemic, leading to excess inventory as Covid-era demand waned.
Earlier this month, Taiwan was hit by an earthquake – its strongest in 25 years. A TSMC spokesperson said construction sites are doing well. during the initial inspection, although workers at some factories were briefly evacuated. These workers subsequently returned to their jobs.
“There were no power outages, no structural damage to our factories or our critical tools, including all of our extreme ultraviolet lithography tools,” Chief Financial Officer Huang told investors and analysts on Thursday.
EUV machines are critical in the production of cutting-edge processors.
However, some wafers were damaged and “had to be written off,” Huang said, adding that the firm expects most of the lost production to be recovered in the second quarter with “minimal impact” on revenue.
The US also recently provided Pre-approval of TSMC subsidiary in Arizona for up to $6.6 billion in government funding to create the world’s most advanced semiconductors. TSMC is also eligible for approximately $5 billion in loans.