TSMC's Q1 2024 earnings thanks to strong demand for AI chips

• Net revenue: NT$592.64 billion (US$18.87 billion), versus NT$582.94 billion expected
• net income: 225.49 billion New Taiwan dollars, compared to 213.59 billion New Taiwan dollars expected

TSMC reported net revenues rose 16.5% from a year ago to NT$592.64 billion, while net income increased 8.9% from a year ago to NT$225.49 billion. a company Targeted first quarter revenue To range between $18 billion and $18.8 billion.

TSMC is the world's largest producer of advanced processors and counts companies such as Nvidia and Apple among its customers.

“For the second quarter of 2024, we expect our business to be supported by strong demand for industry-leading 3nm and 5nm technologies, partially offset by continued smartphone seasonality,” CFO Wendell Huang said during the company's earnings call on Thursday. .

CEO CC Wei said TSMC expects 2024 to be a “healthy” growth year, supported by “technology leadership and a broader customer base.”

“Almost all AI innovators are working with TSMC to meet the insatiable AI-related demand for energy-efficient computing power,” Wei said, adding that the company estimates the revenue contribution from server AI processors to “more than double this year.”

TSMC expects second-quarter revenue to range between $19.6 billion and $20.4 billion.

TSMC currently produces 3nm chips and plans to begin mass production of 2nm chips in 2025. Smaller nanometer size typically results in more powerful and efficient chips.

Strong demand for AI chips, led by the spread of large language models such as ChatGPT and Chinese clones, has sent TSMC shares up 56% in the past year.

“TSMC is well positioned to perform strongly based on key industry trends. Continued demand for advanced chips, especially those used in artificial intelligence applications, is a positive sign in the short and long term. The focus on developing advanced chips, such as “The shift towards 3nm technology is another factor driving TSMC's long-term growth,” the assistant at Counterpoint Research said on Monday before the results were announced.

TSMC accounts for 61% of global foundry revenues In the fourth quarter, according to Counterpoint Research data. Samsung Foundry came in second with 14% of the market.

“TSMC's net profit margin remains one of the highest in the company's history at 40%, versus the industry average of 14%, demonstrating TSMC's strong competitive position. The high margin is a result of increased sales share of 7nm and smaller. , a market analyst at Konotoxia, said last week: “Chips with much higher margins.”

Last year, TSMC's business was impacted by macroeconomic headwinds and inventory adjustments. Smartphone and computer makers have stockpiled chips during the pandemic, leading to excess inventories as demand slumps in the Covid era.

Earlier this month, an earthquake struck Taiwan, the strongest in 25 years. A TSMC spokesman said its construction sites were normal Upon initial inspection, though, workers were briefly evacuated from some factories. These workers then returned to their workplaces.

“There was no power shortage, there was no structural damage to our plants and there was no damage to our critical tools, including all our extreme ultraviolet lithography tools,” CFO Huang told investors and analysts on Thursday.

UV machines are crucial in the production of the most advanced processors.

However, some chips were affected and “had to be scrapped,” Huang said, adding that the company expects to recover most of the lost production in the second quarter, with “minimal impact” on revenue.

It was also recently awarded to the United States Initial approval for TSMC of Arizona To obtain up to $6.6 billion in government funding to build the world's most advanced semiconductors. TSMC is also eligible for about $5 billion in proposed loans.