Taiwan Semiconductor Manufacturing Company (TSMC) on Thursday, April 18, released earnings data for the first quarter of 2024.
The mentioned indicators of one of the world’s main chip makers exceeded the preliminary expectations of experts. The final result was higher than analysts’ forecasts due to the high level of consumer demand for advanced microcircuits, which are necessary for the development, training, and subsequent operation of artificial intelligence systems and digital products based on AI.
The Taiwanese manufacturer’s net revenue in the first three months of 2024 amounted to 592.64 billion new Taiwan dollars (US$18.87 billion). This indicator showed an increase of 16.5% compared to the result for the same period last year. It is worth noting that the consensus forecast of LSEG analysts provided that the company’s net revenue for the first quarter would be fixed at 582.94 billion new Taiwan dollars.
TSMC’s net income for the period from January to March 2024 amounted to 225.49 billion new Taiwan dollars. This indicator increased by 8.9% year-on-year. The consensus forecast of LSEG analysts provided that the company’s net income for the first quarter would amount to 213.59 billion new Taiwan dollars.
Currently, TSMC, as above mentioned, is the world’s largest manufacturer of the newest processors. The company’s clients include brands such as Nvidia and Apple.
TSMC Chief Financial Officer Wendell Huang, during the earnings report on Thursday, said he expected that in the second quarter of the current year, the firm’s business will be supported by a high level of consumer demand for 3-nanometer and 5-nanometer chips.
TSMC CEO C. C. Wei predicts that 2024 will be a year of growth for the brand. According to the head of the firm, the current year will be a positive period for the company’s business in the context of the impact of factors such as TSMC’s technological leadership and expanding customer base.
C. C. Wei says that almost all artificial intelligence developers interact with a Taiwanese manufacturer. In this context, he noted the interest of developers in meeting the significant demand for energy-efficient computing power used in the AI industry. C. C. Wei also said that, according to the company’s estimates, revenue from server processors for artificial intelligence systems will more than double in 2024.
The head of TSMC said he expected the global semiconductor market to grow by about 10% in the current year. It is worth noting that in this case, sales of memory chips are not taken into account.
TSMC expects its revenue to range from $19.6 billion to $20.4 billion in the second quarter. Such a forecast can be a kind of reassurance for investors who fear that the demand for chips for artificial intelligence systems or AI as a technology, in general, will fall shortly. The company’s optimistic expectations are also a positive signal for investors who doubt the high probability of a recovery in the smartphone market, which has been in the condition of a downturn for the past two years. It is worth noting that positive expectations do not always materialize in the space of objective reality.
Next year, the company intends to launch the process of mass production of 2-nanometer chips. Currently, TSMC’s most advanced product is 3-nanometer microcircuits. A smaller nanometer size means a higher level of power and an increase in efficiency.
The Taiwanese manufacturer is one of the main beneficiaries of the so-called artificial intelligence boom, which is largely driven by the emergence of large language models such as ChatGPT and similar Chinese digital products. Against the background of the mentioned tendency, TSMC’s share price has shown an increase of 56% over the past year.
Brady Wang, associate director of Counterpoint Research, says that the Taiwanese company has a chance of strong performance based on the main industry trends. According to him, the continued demand for advanced chips, especially those used in artificial intelligence apps, is a positive sign in the short and long term. Brady Wang stated that the focus on the development of high-end microcircuits, including the shift towards 3-nanometer technology, is another factor forming a kind of complex of positive prospects for the company in the form of a high probability of long-lasting growth.
Counterpoint Research data shows that in the fourth quarter of last year, TSMC accounted for 61% of global foundry revenue. The second place in this indicator is taken by Samsung Foundry. The share of this company in the global revenue of foundry production in the fourth quarter of last year was 14%.
Grzegorz Drozdz, market analyst at Conotoxia, says that TSMC’s net profit margin is still one of the highest in the history of the firm’s existence. The corresponding figure is currently at around 40%. It is worth noting that in the industry, the average net profit margin is 14%. Against this background, there are all fairgrounds to state the fact of the TSMC’s strong competitive position. Grzegorz Drozdz says that the company’s high margin is the result of an increase in the share of 7-nanometer and smaller chips in the sales structure of the Taiwanese manufacturer’s products.
Last year, macroeconomic difficulties and inventory adjustments became factors affecting TSMC’s business. During the coronavirus pandemic, smartphone and personal computer manufacturers were stockpiling chips. This tendency was formed against the background of falling consumer demand in the era of COVID-19. For the mentioned reason, manufacturers of personal computers and smartphones were faced with an excess of chip inventions.
C. C. Wei says that macroeconomic and geopolitical uncertainty persist. According to him, these circumstances are factors of pressure on consumers and are components that form the scale of demand in the market.
Weather conditions could be a factor affecting TSMC’s business this year. In March, an earthquake struck Taiwan, which became the strongest in the last 25 years. Last month, a representative of the company said that during the inspection of the production sites, no destruction or damage was recorded, although workers from some factories were evacuated, but soon returned to their jobs.
Wendell Huang on Thursday once again noted that TSMC factories did not face significant damage amid the earthquake. Separately, it was underlined that the company’s critical tools, including tools for extreme ultraviolet lithography, were not corrupted during a period of high seismic activity. Wendell Huang also noted that the earthquake did not trigger a power shortage. At the same time, he admitted that some wafers were still damaged, which is why they had to be scrapped. Wendell Huang said the company expects most of the lost production to be recovered in the current quarter. TSMC also hopes that the mentioned process will have a minimal impact on the firm’s revenue figure.
The equipment for extreme ultraviolet lithography is of critical importance in the production process of the most modern processors.
In the United States, TSMC’s Arizona-based subsidiary has received preliminary approval for up to $6.6 billion in government funding to manufacture the world’s most advanced semiconductors. The company is also eligible for loans worth about $5 billion.
As we have reported earlier, TSMC to Open Second Japan Chip Factory.
