A logo of Taiwan Semiconductor Manufacturing Company (TSMC) is seen during the opening ceremony of the TSMC Global RnD Center in Hsinchu on July 28, 2023. (Photo by Amber Wang / AFP)
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Taiwan Semiconductor Manufacturing Company on Thursday beat expectations for revenue and earnings in the first quarter, thanks to continued strong demand for advanced chips, particularly those used in artificial intelligence applications.
Here are TSMC’s first-quarter results versus LSEG’s consensus estimates:
- Net income: NT$592.64 billion ($18.87 billion), versus NT$582.94 billion expected
- Net income: NT$225.49 billion, vs. NT$213.59 billion expected
TSMC said net income rose 16.5 percent from a year ago to NT$592.64 billion, while net income rose 8.9 percent from a year ago to NT$225.49 billion. The company first quarter revenue guidance to be between 18 and 18.8 billion dollars.
TSMC is the world’s largest producer of advanced processors and counts the likes of Nvidia and Apple as customers.
“For the second quarter of 2024, we expect our business to be supported by strong demand for industry-leading 3nm and 5nm technologies, partially offset by continued smartphone seasonality,” CFO Wendell Huang said during the call company’s earnings on Thursday. .
CEO CC Wei said TSMC expects 2024 to be a “healthy” year of growth, supported by “our technology leadership and broader customer base.”
“Almost all AI innovators are working with TSMC to address an insatiable AI-related demand for energy-efficient computing power,” Wei said, adding that the company estimates the revenue contribution from AI processors will is “more than doubled this year”.
TSMC expects second-quarter revenue to range between $19.6 billion and $20.4 billion.
TSMC currently produces 3-nanometer chips and plans to begin mass production of 2-nanometer chips in 2025. Typically, a smaller nanometer size yields more powerful and efficient chips.
Strong demand for AI chips that has led to a proliferation of big-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, particularly those used in artificial intelligence applications, is a positive sign in both the short and long term. The focus on advanced chip development , such as The shift to 3nm technology, is another factor driving long-term growth for TSMC,” Brady Wang, associate director at Counterpoint Research, said Monday ahead of the results.
TSMC accounted for 61% of global foundry revenue in the fourth quarter, according to data from Counterpoint Research. Samsung Foundry came second with 14% of the market.
“TSMC’s net profit margin continues to be one of the highest in the company’s history at 40%, versus an industry average of 14%, demonstrating TSMC’s strong competitive position. The high margin is a result of increased 7nm sales share 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 headwinds and inventory adjustment. Smartphone and computer makers stockpiled chips during the pandemic, leading to excess inventories as demand in the Covid era has shrunk.
Earlier this month, Taiwan was hit by an earthquake – the strongest in 25 years. A TSMC spokesman said its construction sites were operating normally during the initial inspection, although workers from some factories were briefly evacuated. These workers then returned to their workplaces.
“There have been no power outages, no structural damage to our factories and no damage to our critical tools, including all extreme UV lithography tools,” CFO Huang told investors and analysts on Thursday.
EUV machines are critical to the production of the most advanced processors.
However, some wafers were affected and “had to be scrapped,” Huang said, adding that the company expects most of the lost production to be recovered in the second quarter, with “minimal impact” on revenue.
“We just guided our second quarter gross margin to decrease 1.1 percentage points to 52% on average, primarily due to the impact from the April 3rd earthquake, as just discussed, and higher electricity costs in Taiwan” , Huang said.
The US has also recently conceded Pre-approval of TSMC subsidiary in Arizona for up to $6.6 billion in government funding to build the world’s most advanced semiconductors. TSMC is also eligible for about $5 billion in proposed loans.