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Taiwan Semiconductor Manufacturing Company (TSMC), the largest chipmaker globally, has increased its growth outlook due to a surge in artificial intelligence demand and a recovery across diverse sectors, challenging concerns regarding the sustainability of the current industry upcycle. CC Wei, the chair and chief executive of TSMC, informed investors on Thursday about observing extremely strong AI-related demand, projecting a revenue growth of nearly 30 percent this year. This optimistic guidance followed the company’s report of a substantial 54 percent year-on-year increase in net profit, reaching NT$325.3 billion (US$10.1 billion) for the third quarter, surpassing forecasts made three months prior.
This development occurred amid a broader tech market sell-off after ASML, the Dutch supplier of lithography machines essential for manufacturing advanced chips, announced orders falling short of analysts’ expectations. Unlike the challenges faced by ASML, TSMC, which leads in producing cutting-edge semiconductors, appears unaffected by this downturn.
Wei highlighted that nearly every company involved in designing AI chips, including major players like Amazon and Microsoft, constitutes TSMC’s clientele. He emphasized that the demand is genuine and anticipated it would persist for many years. TSMC anticipates the revenue share from AI-related chips to triple to 15 percent this year compared to 2023.
In addition to the AI-driven growth, TSMC reported a strong third-quarter performance, with revenue, gross margins, and operating margins exceeding earlier projections. This performance was bolstered by a recovery in demand across various segments, including smartphones, industrial applications, and automotive chips.
Despite the positive outlook, TSMC remains slightly cautious about investing in new capacity. Capital expenditure is projected to likely exceed $30 billion in 2025, which is higher than this year’s spending but falls short of the company’s full-year forecast, with only $18.5 billion spent by the end of September. A significant portion of investment in advanced capacity typically involves spending on ASML machines.
Analysts indicated that ASML’s weak third-quarter orders were attributed more to Intel and Samsung, as both companies face challenges in maintaining competitiveness in chip manufacturing for external clients. TSMC collaborates with over 500 companies, manufacturing chips including Nvidia’s latest AI processors and Apple’s iPhone components, a business model that provides unmatched scale and stability.
Ben Barringer, a technology analyst at Quilter Cheviot, noted TSMC’s ongoing strength despite ASML’s negative update, contributing to renewed confidence in the sector. He added that TSMC’s stable business outside of AI positions it advantageously over Intel and Samsung, suggesting it could withstand any potential downturn in the sector and emerge in a strong position.