Taiwanese semiconductor manufacturing company beat second-quarter revenue and profit expectations on Thursday as demand for advanced chips for AI applications continues to rise.
Here are TSMC's second-quarter results in comparison with LSEG consensus estimates:
- Revenue: 673.51 billion New Taiwan dollars (20.82 billion US dollars), in comparison with 657.58 billion NT$ expected
- Net income: NT$247.85 billion versus NT$238.8 billion LSEG SmartEstimate weights forecasts from analysts which are consistently more accurate
TSMC reported a 40.1% year-on-year increase in net revenue to NT$673.51 billion, while net profit rose 36.3% year-on-year to NT$247.85 billion. The company guided Second quarter revenue will likely be between $19.6 billion and $20.4 billion.
In a conference call on Thursday, CC Wei, the corporate's chairman and CEO, said second-quarter business was supported by strong demand for its industry-leading 3-nanometer and 5-nanometer technologies, but this was offset by ongoing seasonality in smartphones.
The explosion in demand for AI has strained chip supplies. TSMC is the world's largest producer of advanced chips present in every little thing from smartphones to AI applications, although rivals equivalent to Samsung and Intel have tried to challenge his dominance. It counts Apple And NVIDIA to his customers.
“I also try to balance supply and demand, but I can't do it. Today, demand is so high that I have to work very hard to meet customer demand,” Wei told analysts.
“Supply will remain quite tight until 2025,” Wei warned, adding that the corporate hopes the availability shortage can ease in 2026.
The chip giant currently produces 3-nanometer chips and plans to start out mass production of 2-nanometer chips in 2025. Typically, a smaller nanometer size leads to more powerful and efficient chips.
The development of 2-nanometer technology is making “good progress” and is heading in the right direction for mass production in 2025, TSMC said.
In the third quarter, business is anticipated to be supported by strong demand within the smartphone and AI sectors, Wei said, adding that 2024 continues to be expected to be “a strong growth year for TSMC.”
TSMC expects third-quarter revenue of between $22.4 billion and $23.2 billion. In the identical period last yr, revenue was $17.3 billion.
The company is reducing its capital expenditure budget this yr to $30 billion to $32 billion, down from a previous forecast of $28 billion to $32 billion. Of that budget, 70 to 80 percent will go toward advanced technologies.
“We are working very, very hard to get enough capacity to support customers,” Wei said.
The company also added that it doesn’t rule out the potential for converting more “N5” technology to “N3” technology to satisfy strong demand for 3-nanometer chips.
TSMC shares closed 2.43 percent lower on Thursday as Asian chip stocks slumped amid a sell-off in U.S. technology stocks sparked by a report that Washington is considering tighter export restrictions.
Great demand for AI
Rising demand for advanced chips for AI applications has pushed TSMC's Taiwan-listed share price up nearly 70% to this point this yr.
“Demand for generative AI is increasing in the cloud and at the edge. TSMC's N3 process is characterized by good yield rates and well-managed production lines. The market is well funded and regional political factors are driving increased demand for advanced processes,” said Brady Wang, deputy director of Counterpoint Research, on Friday ahead of the outcomes release.
According to Wang, the capability of the 3-nanometer process is anticipated to greater than double in 2024 in comparison with last yr.
On Monday, analysts at Needham said they expected TSMC to boost its 2024 revenue growth goal. They reiterated their buy rating and raised the worth goal for the chip giant's U.S.-listed shares to $210 from $168.
“We expect TSMC to boost its 2024 revenue growth forecast from ‘low-mid 20s’ to ‘mid-high 20s’, but maintain its 2024 forecast. [capital expenditures] The goal is $30 billion on the upcoming earnings call,” Needham said in a statement.
TSMC held 62% of the global market share in the foundry sector in the first quarter, compared to 59% in the same period last year. Counterpoint Research Data.
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