TSMC’s offices in San Jose, California, USA, on Thursday, April 18, 2024.
David Paul Morris | Bloomberg | Getty Images
Taiwan Semiconductor Manufacturing Company It beat expectations for second-quarter revenue and profit on Thursday as demand for advanced chips used in artificial intelligence applications continues to grow.
Here are TSMC’s second-quarter results versus LSEG’s consensus estimates:
- Income: NT$673.51 billion ($20.82 billion), versus NT$657.58 billion expected
- Net income: NT$247.85 billion, versus NT$238.8 billion LSEG SmartEstimate weighted toward analysts’ forecasts that are more consistently accurate
TSMC said net revenue rose 40.1 percent from a year ago to NT$673.51 billion, while net profit rose 36.3 percent from a year ago to NT$247.85 billion. The company guided Second quarter revenue will range between $19.6 billion and $20.4 billion.
President and CEO CC Wei said in an earnings conference call Thursday that second-quarter activity was supported by strong demand for industry-leading 3-nanometer and 5-nanometer technologies, although offset by continued smartphone seasonality .
Exploding demand for artificial intelligence has driven up chip supplies. TSMC is the world’s leading producer of advanced chips found in everything from smartphones to artificial intelligence applications, although rivals such as Samsung and Intel they tried to challenge her rule. Counts apple and Nvidia among its clientele.
“I’m also trying to reach the balance of supply and demand, but I can’t. Today, demand is so high that I had to work very hard to meet customer demand,” Wei told analysts.
“Supply continues to be quite tight, until 2025,” Wei warned, adding that the company hopes tight supply may ease in 2026.
The chip giant 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.
Development of 2-nanometer technology is “progressing well” and is on track for volume production in 2025, TSMC said.
For the third quarter, the business is expected to be supported by strong demand for smartphones and artificial intelligence, Wei said, adding that they continue to expect 2024 to be “a strong growth year for TSMC.”
TSMC forecasts third-quarter revenue between $22.4 billion and $23.2 billion. That compares with $17.3 billion in revenue recorded in the same period a year ago.
For its capital budget this year, the company is narrowing the range to between $30 billion and $32 billion, down from a previous forecast of $28 billion to $32 billion. Of this budget, 70% to 80% will be allocated to advanced technologies.
“We are working very, very hard to have enough capacity to support customers,” Wei said.
The company also added that it does not rule out converting more “N5” technology to “N3” technology to meet strong demand for 3-nanometer chips.
Shares of TSMC closed 2.43 percent lower on Thursday as Asian chip stocks fell on a U.S. tech sell-off sparked by reports that Washington is considering tighter export restrictions.
High demand for artificial intelligence
Rising demand for advanced chips used in artificial intelligence applications has boosted TSMC shares on the Taiwan stock exchange by nearly 70% so far this year.
“Demand for genetic AI is growing in the cloud and at the edge. TSMC’s N3 process boasts good throughput rates and well-managed production lines. The market is well-funded and regional political factors are driving increased demand for advanced processes, ” Brady Wang, deputy director of Counterpoint Research, said Friday before the results.
Wang said the capacity of the 3-nanometer process is expected to more than double in 2024 compared to the previous year.
Analysts at Needham said on Monday they expect TSMC to raise its 2024 revenue growth target, reiterating a “buy” rating and raising their price target to $210 from $168 on the chip giant’s publicly traded shares in the USA.
“We expect TSMC to raise its 2024 revenue growth outlook from ‘low to mid 20s’ to ‘mid to high 20s,’ but maintain 2024 [capital expenditures] target at $30 billion in the upcoming earnings call,” Needham said in a note.
TSMC held 62% of the global foundry market share in the first quarter, up from 59% in the same period a year ago, according to Counterpoint research data.
