TSMC bullish on outlook as AI boom drives Q3 profit past forecasts

TSMC, the world's largest contract chipmaker, bet on sustaining its strong growth, after reporting on Thursday a forecast-beating 54 per cent jump in quarterly profit driven by soaring demand for chips used in artificial intelligence (AI).
 

Taiwan Semiconductor Manufacturing Co, the dominant producer of advanced chips used in AI applications whose customers include Apple and Nvidia, has benefited from a surge towards AI across a spectrum of industries.
 

TSMC estimated its capital spending in the current quarter would more than double to around $11.5 billion and that the budget was likely to increase further next year, as it expects healthy demand for its products.
 

It said 2024 full-year revenue will grow close to 30 per cent in US dollar terms, compared to a previous guidance of slightly above the mid-20 per cent range.
 

The company's robust performance and outlook underscore the continued strong demand for AI, after some industry watchers raised doubts following a lower than expected 2025 sales outlook earlier this week from ASML, the world's biggest chipmaking equipment supplier.
 

At its quarterly earnings call on Thursday, TSMC said it expects capital expenditure for this year at slightly higher than $30 billion, compared with a previous forecast of $30 billion-$32 billion, as it races to expand production.
 

Capital expenditure for 2025 was likely to be higher than this year, TSMC said, although it did not provide a figure.
 

It said next year looks to be "healthy", and forecast a similar outlook for the next five years.
 

TSMC is spending tens of billions of dollars building new factories overseas, including $65 billion on three plants in the US

state of Arizona, though it has said most manufacturing will remain in Taiwan.
 

It said on Thursday it expects its first fab in Arizona to see volume production in 2025, while its second fab there should start volume production in 2028. It forecasts the third Arizona fab to begin volume production by the end of the decade.
 

The Taiwan chipmaker said it expected fourth-quarter revenue of $26.1 billion-$26.9 billion, up from $19.62 billion in the same period of 2023.

Record quarterly profit

The bellwether for the chip industry reported earlier on Thursday a net profit of T$325.3 billion ($10.11 billion) for the quarter ended Sept. 30, its highest for any quarter, compared with the T$300.2 billion predicted by an LSEG SmartEstimate drawn from 22 analysts. SmartEstimates give greater weighting to forecasts from analysts who are more consistently accurate.
 

TSMC, Asia's most valuable publicly listed company, said third-quarter revenue rose 36 per cent year-on-year to $23.5 billion, better than the company's previous forecast of $22.4 billion to $23.2 billion. The company last week announced third-quarter revenue in Taiwan dollars, coming in at T$759.69 billion.
 

"Our business in the third quarter was supported by strong smartphone and AI-related demand for our industry-leading 3nm and 5nm technologies," Wendell Huang, TSMC's CFO, told a press conference. "Moving into the fourth quarter of 2024, we expect our business to continue to be supported by strong demand for our leading-edge process technologies."
 

The second half of the year is traditionally the peak season for Taiwanese tech companies as they race to supply customers ahead of the year-end holiday season in major Western markets.
 

Capital expenditure in the third quarter was $6.4 billion, TSMC said, compared with $6.36 billion in the second quarter.

The AI boom has helped drive up TSMC shares, with its Taipei-listed stock leaping 75 per cent so far this year, compared with a 28 per cent gain for the broader market, giving the company a market capitalisation of around $840 billion.
 

TSMC, colloquially referred to in Taiwan as the "sacred mountain protecting the country" for its critical role in Taiwan's export-dependent economy, faces little competition, though both Intel and Samsung are trying to challenge its dominance.

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