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TSMC net profit up 8.9% in Q1 on strong AI demand
Taiwan chipmaker snaps streak of declining profit; analysts positive on expansion in U.S.
Taiwan chip titan TSMC is benefiting from demand for chips to power generative AI. © Reuters
CHENG TING-FANG, Nikkei Asia chief tech correspondent
April 18, 2024 14:37 JST
TAIPEI -- Taiwan Semiconductor Manufacturing Co. has returned to growth after three straight quarters of year-on-year declines in net profit, a sign that the global tech industry is rebounding, helped by the generative AI boom.
The world's largest contract chipmaker said Thursday that its net profit for January to March came in at 225.49 billion New Taiwan dollars ($6.9 billion), up 8.9% from NT$206.99 billion from a year ago. Gross margin for the quarter was 53.1%, slightly higher than last quarter's 53%.
Revenue for the first three months of 2024 grew 16.5% on year to NT$592.64 billion, its first year-on-year growth since April-June 2023, during a global downturn in tech. TSMC supplies almost all major chip developers, including Apple, Amazon, Nvidia, Qualcomm, AMD and MediaTek.
TSMC's earnings came just after one of its top chip equipment suppliers, ASML, posted a weaker-than-expected financial performance and forecast for the current quarter, citing soft demand for cutting-edge chipmaking tools. The downbeat news surprised the global chip industry and sent semiconductor-related stocks down.
In a significant move, TSMC announced this month it will bring the world's most advanced 2-nanometer chip production to the U.S. This technology is suitable for building high-end processors for AI, smartphones and computers. The Taiwanese chip titan also plans to build a third chip plant in Arizona, boosting its total U.S. investment by 60%, to $65 billion.
The U.S. government, for its part, has awarded TSMC its largest subsidy ever to a foreign chipmaker, a $6.6 billion grant. A grant for Samsung announced the following week, however, was larger as a percentage of planned corporate investment: a $6.4 billion grant versus a $45 billion investment. Top U.S. chipmaker Intel received the biggest grant in absolute terms, at $8.5 billion.
TSMC said the massive earthquake that recently struck Taiwan -- where most of its production is based -- will not change the company's forecast revenue growth for the full year of about 21% to 26%. TSMC and its suppliers were able to get production back to normal within days of the quake.
Mark Li, a veteran analyst with Bernstein Research, said TSMC is likely to have "impressive growth" for 2024, thanks to cyclical recovery and a boost from AI. Because TSMC is the sole supplier of processor chips for Apple's iPhones, some analysts worry that chip orders for the iconic device could weaken this year due to Huawei's resurgence in China. Li, however, said this concern is mainly due to soft iPhone demand in China, and sales of other high-end Android phones using TSMC-produced processors are better than expected globally.
TSMC's overseas diversification, meanwhile, should mitigate investors' geopolitical concerns, and the new phase of investment reaffirms strong demand for AI from U.S. customers, Charlie Chan, an analyst with Morgan Stanley, said in a research note. According to Chan, "2-nanometer production in the U.S. should help protect TSMC's market share against Intel's 18A." The U.S. company is also getting into the business of making chips for others, a sector TSMC dominates globally.