TSMC Beats Revenue And Profit Expectations Thanks To AI Chips

(CTN News) – The Taiwan Semiconductor Manufacturing Company (TSMC) beat revenue and profit expectations in the first quarter thanks to AI chips.

TSMC’s first-quarter results compared to LSEG consensus:

• A net revenue of NT$592.64 billion ($18.87 billion), versus NT$582.94 billion expected

• A net income of NT$225.49 billion compared to NT$213.59 billion expected

Last year, TSMC had NT$592.64 billion in net revenue and NT$225.49 billion in net income. It’s expected to make $18 billion to $18.8 billion in revenue in the first quarter.

With Nvidia and Apple as clients, TSMC is the world’s biggest processor maker.

CFO Wendell Huang said during the firm’s earnings call Thursday that “for the second quarter of 2024, we expect strong demand for industry-leading 3-nanometer and 5-nanometer technologies, offset by continued smartphone seasonality.”

A “healthy” growth year is expected for in 2024, thanks to “our technology leadership and broader customer base.”

Wei said the firm estimates the revenue contribution from server AI processors to “more than double this year” since almost all AI innovators are working with TSMC. Revenue for the second quarter is expected to be between $19.6 billion and $20.4 billion.

In 2025, plans to start mass producing 2-nanometer chips. It’s usually more efficient and powerful to make chips smaller. The proliferation of large language models like ChatGPT and Chinese clones has caused TSMC’s shares to surge 56% in the past year.

“TSMC is well-positioned for strong performance in light of key industry trends. Advanced chips, particularly those used in AI, are in high demand for the short and long term. TSMC’s focus on advanced chip development, like 3nm technology, is another factor driving long-term growth,” Brady Wang, associate director at Counterpoint Research, said on Monday.

In the fourth quarter, TSMC generated 61% of global foundry revenue.

Samsung Foundry came in second with 14%. “TSMC’s net profit margin is one of the highest in the company’s history at 40%, versus an industry average of 14%, demonstrating its strong competitive position.

According to Grzegorz Drozdz, market analyst at Conotoxia, “the high margins come from 7nm and smaller chips, which have significantly higher margins.”

TSMC’s business last year was affected by macroeconomic headwinds and inventory adjustments. After the Covid pandemic, smartphone and PC makers stocked up on chips, leading to surplus inventories.

There was an earthquake in Taiwan earlier this month – the strongest in 25 years. On initial inspection, construction sites looked normal, though some fab workers had to evacuate briefly. They returned to work later.

In a letter to investors and analysts on Thursday, CFO Huang said there were no power shortages, structural damage to the fab and no damage to our critical tools. Advanced processors require EUV machines. However, some wafers had to be scrapped, Huang said, adding that the firm expects most of the lost production will be recovered in the second quarter.

Additionally, the U.S. recently approved $6.6 billion in government funding for Arizona subsidiary. There’s also a $5 billion loan proposal for TSMC.

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