Source – communicationstoday.co.in
Strong Financial Performance
Taiwan Semiconductor Manufacturing Company (TSMC) surpassed revenue and profit expectations in the second quarter, driven by a surge in demand for advanced chips used in artificial intelligence (AI) applications. The company reported a 40.1% increase in net revenue, reaching NT$673.51 billion, and a 36.3% rise in net income to NT$247.85 billion compared to the same period last year. TSMC had previously guided second-quarter revenue to be between $19.6 billion and $20.4 billion.
High Demand for Advanced Technologies
During an earnings call, TSMC Chairman and CEO C.C. Wei attributed the robust performance to strong demand for the company’s leading 3-nanometer and 5-nanometer technologies. However, he noted that this was partially offset by seasonal fluctuations in smartphone demand. Despite the high demand, Wei acknowledged the challenges in balancing supply and demand, predicting that tight supply conditions will persist through 2025, with hopes for relief in 2026.
Production and Future Prospects
TSMC currently manufactures 3-nanometer chips and plans to begin mass production of 2-nanometer chips in 2025. The development of 2-nanometer technology is reportedly progressing well and remains on schedule. Looking ahead to the third quarter, Wei expects strong demand from both the smartphone and AI sectors to support the business. TSMC projects third-quarter revenue between $22.4 billion and $23.2 billion, a significant increase from the $17.3 billion reported in the same period last year.
Investment and Capacity Expansion
For 2024, TSMC anticipates a strong growth year, bolstered by rising AI demand. The company has narrowed its capital expenditure forecast for the year to between $30 billion and $32 billion, from an earlier range of $28 billion to $32 billion. A significant portion of this budget, 70% to 80%, will be allocated to advanced technologies. Wei emphasized the company’s efforts to expand capacity to meet customer needs, including the potential conversion of more “N5” technology to “N3” technology to accommodate the demand for 3-nanometer chips.
Market Response and AI Demand
Despite the positive financial results, Taiwan Semiconductor Manufacturing Company shares fell by 2.43% on Thursday, following a broader decline in Asian chip stocks triggered by concerns over potential tighter U.S. export controls. Nevertheless, TSMC’s Taiwan-listed shares have surged nearly 70% this year, driven by the booming demand for AI chips. According to Brady Wang, associate director of Counterpoint Research, the 3-nanometer process capacity is expected to more than double in 2024 compared to the previous year.
Analyst Projections
Needham analysts have reiterated a “buy” rating for TSMC’s U.S.-listed shares, raising the price target from $168 to $210. They expect TSMC to increase its 2024 revenue growth outlook from “low- to mid-20s” to “mid- to high-20s,” while maintaining its capital expenditures target at $30 billion. TSMC held a dominant 62% share of the global foundry market in the first quarter, up from 59% in the same period last year, according to Counterpoint Research data.
Taiwan Semiconductor Manufacturing Company‘s impressive performance and strategic investments underscore its pivotal role in the semiconductor industry, particularly as the demand for AI and advanced technologies continues to rise.
