Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest contract chip maker, has bet on maintaining its steady growth against the background of the results of operations for the third quarter of the current year, which testified that this firm is one of the beneficiaries of the so-called artificial intelligence boom.
Currently, the mentioned company is the dominant manufacturer of advanced microcircuits that are used in machine intelligence apps. TSMC’s clients include such giants of the global technology sector like Apple and Nvidia, for example. The company is the beneficiary of such a worldwide tendency as the active dissemination of artificial intelligence. AI is gradually becoming a new means of production, which has the potential to become an impulse for fundamental changes in the economy in general and in industry in particular. Also, the most long-term futurological forecasts provide for a high probability of incremental transformation of machine intelligence into an independent form of consciousness capable of evolution without external help and self-contained cognition of the world in the global philosophical sense of the corresponding definition. The environment of artificial intelligence is a virtual space, but for the qualitative development of the appropriate technology milieu and the elementary maintenance of the very possibility of its existence’s continuation, a material base is needed, the main component of which is chips. Against this background, the upward dynamic of TSMC’s business is logical and natural.
The company’s preliminary estimate provides that its capital spending in the current quarter of the present year will show an increase of more than two times and reach the $11.5 billion mark. The chip manufacturer also expects that, with a high degree of probability, the corresponding indicator will continue to demonstrate growth next year. The appropriate vision of the prospects for 2025 is associated with the company’s confidence that there will be a high level of consumer demand for its products. It is worth noting that these expectations are generally justified, since the artificial intelligence industry is on the trajectory of active development, and without chips, it is impossible to continue the corresponding movement towards the improvement of increasingly advanced digital cognitive systems.
The company also predicts that its revenue for the whole of 2024 will show an increase of almost 30% in US dollar terms compared to the previous guidance. Separately, TSMC said that revenue from artificial intelligence processors in the current year is set to account for a mid-teens percentage of its overall revenue.
C.C. Wei, Chairman and chief executive officer of the company, stated during the earnings call that the demand is real. In this case, he meant the demand associated with artificial intelligence. Also, according to him, the corresponding dynamic will last for many years.
It is worth noting that TSMC’s already materialized results in terms of financial performance and expected accomplishments of an appropriate nature are examples of the high demand for artificial intelligence. This is positive news that has improved market sentiment and expert opinions regarding the prospects of the AI industry in the context of the financial dimension of the existence of this activity space. The mentioned opinions and sentiments deteriorated after the disappointing ASML sales outlook for 2025 was unveiled. It is worth clarifying that the mentioned Dutch company is the world’s largest supplier of chip manufacturing equipment.
Against the background of positive data from TSMC, an increase in the value of shares of United States-based chip developers and manufacturers was recorded. For example, the corresponding indicator of Nvidia and its competitor AMD increased by more than 2.5%. The value of shares of Micron Technology, Intel, and Qualcomm showed growth in the range from 1.5% to 3%.
TSMC securities are also on an upward trajectory. Data on the company’s earnings for the third quarter of 2024 and expectations for the further dynamic were published last Thursday, October 17. On Friday, October 18, the value of TSMC shares reached a record high. It’s worth noting that in this case, a significant factor influencing the positive dynamic was not only the data directly related to the company’s already recorded and expected performance, but also the fact that the relevant information signals the enthusiasm of the world’s largest contract chip manufacturer regarding the global demand for artificial intelligence. On Friday, TSMC shares closed up 4.8% at T$1,085 ($33.77). It is worth noting that in this case, the previous record of T$1,080, recorded on July 11, was surpassed. Against this background, the company’s market capitalization exceeded the $874 billion mark. It is worth noting that this figure is the highest among all listed firms in Asia. The benchmark index (.TWII) rose 1.9%.
The company said on Thursday that it expects its capital expenditures for the full year 2024 to be just over $30 billion. It is worth noting that TSMC’s previous forecast provided that the corresponding figure would range from $30 billion to $32 billion. The company is currently expanding production. As for the expectations regarding capital expenditures in 2025, in this case, TSMC stated that this figure would increase, but did not specify the figures.
The company also separately noted that the next year looks to be healthy. The manufacturer also predicts that the relevant prospects will be relevant over the next five years.
Piter Yang, a fund manager of Fuh Hwa Securities Investment Trust, said that the data released by TSMC had wiped away concerns about the scenarios of the future for the industry, which were formed against the background of disappointing ASML earnings. In this context, the expert also noted that the Taiwan-based chip manufacturer is a dominant firm. At the same time, Piter Yang underlined that TSMC is the only company with advanced technological processes that industry players such as Intel and South Korean Samsung do not have.
Currently, the Taiwanese chip manufacturer is spending tens of billions of dollars to build factories abroad. In this context, it is worth mentioning, for example, financing for $ 65 billion. The mentioned amount is intended for the implementation of projects for the construction of three factories in the US state of Arizona. At the same time, the company noted that after the start of operation of the specified production sites, most of the production process will still be carried out in Taiwan.
On Thursday, TSMC said it expects its first Arizona plant to begin mass-making chips in 2025. The company also predicts that the second production site in this region of the United States will become operational in 2028. TSMC plans to launch a third plant in Arizona by the end of the current decade. In this case, so far there is no forecast containing more specific dates for the start of operation of the production site.
The company expects its revenue for the fourth quarter of the current year to be fixed at around $26.1 billion to $26.9 billion. It is worth noting that for the same period in 2023, the corresponding figure amounted to $ 19.62 billion.
The company’s net profit for the third quarter of the current year was fixed at $10.11 billion. It is worth noting that this indicator is the highest in all previous quarters.
The company’s revenue for the third quarter of the current year was fixed at $23.5 billion. This indicator showed an increase of 36% compared to the result for the same period in 2023. It is also worth noting separately that the company expected its revenue for the third quarter of 2024 to range from $24.2 billion to $23.2 billion.
TSMC chief financial officer Wendell Huang said that last quarter the business of the firm was supported by strong consumer demand for smartphones and artificial intelligence. In the relevant context, 3nm and 5nm technology companies that are leading in the industry were mentioned. Wendell Huang also stated that the firm expects its business to continue to be supported by strong demand for the mentioned leading-edge process technologies in the fourth quarter of the current year.
It is worth noting that the second half of any year is traditionally a kind of peak period for Taiwan-based technology companies. During this period, the mentioned firms are involved in a kind of race to supply products to major Western markets ahead of the year-end holiday season.
TSMC’s capital expenditures in the third quarter of 2024 were fixed at $6.4 billion. It is worth noting that in the previous quarter, this figure amounted to $6.36 billion.
The so-called artificial intelligence boom has become a factor in the growth of the value of shares of the Taiwanese chip manufacturer in the long term. Since the beginning of the current year, the corresponding indicator has increased by 75%.
The importance of TSMC as a business structure is gradually growing, which is a pattern against the background of its achievements and its current position as an industry player. In Taiwan, the company even has a kind of symbolic name. Locals call TSMC the sacred mountain that protects the country. The corresponding definition implies a significant contribution of the company to export activities, on which the economic system of Taiwan largely depends. Recently, TSMC has been facing a gradual increase in competition from Samsung and Intel. However, the dominant market position of the Taiwanese manufacturer continues to demonstrate a high level of stability and has not yet been challenged in a sensitive manifestation for the company.
According to media reports, TSMC is facing a kind of political uncertainty in the United States. Journalists have released information that the US Commerce Department is investigating whether the company is involved in the production of chips for Chinese Huawei, whose access to the import of advanced microcircuits is limited by the norms of supply control imposed by Washington. It’s worth noting. This week, the media also reported that the administration of the President of the United States Joe Biden is considering capping the sale of artificial intelligence chips from Nvidia and other US companies to some countries. It is worth noting that for Washington, the relevant issue is largely a matter of principle. Against the background of growing geopolitical tensions, the chip development and manufacturing sector is gradually becoming what can be described as an area of rivalry between world capitals. In a sense, this is a natural situation, since the importance of microcircuits for a new generation economy based on advanced technologies and the large-scale expansion of the digital space as a new dimension of objective reality is enormous. The United States has already restricted the supply of high-end chips and equipment for the production of related products to China. For companies that develop and make microcircuits, such a reduction in the scope of export opportunities is definitely a negative factor, leaving financial indicators and prospects for further activities. The corresponding restrictions are one of the forms of manifestation of the growth of geopolitical tension, which is gradually becoming one of the most characteristic features of the current historical moment.
Returning to the topic of TSMC’s activities, it is worth noting that this week the media, referring to a senior Taiwanese official, published information that TSMC has plans to build plants in Europe. Taiwan’s National Science and Technology Council Minister Wu Cheng-wen told reporters that TSMC is already building a factory in Dresden, Germany, and intends to implement several more similar projects in the mentioned region in the future. The official clarified that the new plants will be designed to produce products for various market sectors.
The construction of the production site in Dresden began in August. The cost of this project is $10.9 billion. The mentioned production site will be the first TSMC plant in the European Union. About half of the funding for this project will be covered by state subsidies. It is expected that the operation of the Dresden plant will begin by the end of 2027.
Also in February, TSMC opened its first factory in Japan. This production site is located in the Kumamoto region, in the southwestern part of the mentioned country. It is worth noting that in February it also became known about the company’s plans to build a second plant in Japan. It is expected that this production site will begin operating in 2027. According to preliminary information, the second Japanese TSMC plant will also be located in Kumamoto. Moreover, in February, the media reported that the company was considering the possibility of building a third production site in the specified country.
TSMC is currently demonstrating activity in the context of expanding the scale of its global presence. To a large extent, these efforts are related to the deterioration of relations between Western capitals and Beijing, against which the United States and the European Union are interested in diversifying production capacities outside of China, which has recently become the so-called factory of the world.
