By Yimou Lee, Ben Blanchard and Faith Hung
TAIPEI (Reuters) – TSMC, the world’s largest contract chipmaker, is betting on maintaining strong growth, after reporting on Thursday a 54% rise in forecast quarterly profit driven by strong demand for chips used in artificial intelligence (AI ).
Taiwan Semiconductor Manufacturing Co, a leading producer of advanced chips used in AI applications whose customers include Apple and Nvidia, has benefited from the surge towards AI across the industrial spectrum.
TSMC estimates that capital spending in the current quarter will more than double to about $11.5 billion and that the budget will increase further next year, as it expects healthy demand for its products.
It said 2024 revenue would grow nearly 30% in US dollar terms, compared to previous guidance of slightly above the mid-20% range.
The company’s strong performance and outlook underscored continued demand for AI, after some industry observers cast doubt following a lower-than-expected 2025 sales outlook earlier this week from ASML, the world’s largest supplier of chipmaking equipment.
In its quarterly earnings call on Friday, TSMC said it expects capital spending for this year to be slightly more than $30 billion, compared to an earlier estimate of $30 billion-$32 billion, as it races to expand production.
Capital spending for 2025 is likely to be higher than this year, TSMC said, although it did not provide a figure.
He said next year looks “healthy”, and predicted the same for the next five years.
TSMC is spending tens of billions of dollars to build new factories overseas, including $65 billion on three factories in the US state of Arizona, although it has said most manufacturing will remain in Taiwan.
On Thursday, it expects the first plant in Arizona to start volume production in 2025, while the second manufacturer should start volume production in 2028. The third Arizona manufacturer is expected to start volume production by the end of the decade.
The Taiwanese chipmaker said it expects fourth-quarter revenue of $26.1 billion-$26.9 billion, up from $19.62 billion in the same period in 2023.
RECORD quarterly profit
The bellwether for the chip industry reported earlier that there was a net profit of T $ 325.3 billion ($ 10.11 billion) for the quarter ended September 30, the highest for any quarter, compared to T $ 300.2 billion predicted by LSEG SmartEstimate drawn from 22 analysts. SmartEstimates gives greater weight to forecasts from analysts that are consistently more accurate.
TSMC, Asia’s most valuable public company, said third-quarter revenue rose 36% year over 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 its third-quarter revenue in Taiwan dollars, coming in at T$759.69 billion.
“Our business in the third quarter was driven by strong smartphone and AI-related demand for our industry-leading 3nm and 5nm technologies,” TSMC CFO Wendell Huang told a press conference. “Moving into the fourth quarter of 2024, we expect our business to continue to be supported by strong demand for state-of-the-art process technologies.”
The second half of the year is typically peak season for Taiwanese tech companies as they race to supply customers ahead of the year-end holiday season in key Western markets.
Capital expenditures in the third quarter were $6.4 billion, TSMC said, compared with $6.36 billion in the second quarter.
The AI ​​boom has helped lift TSMC’s stock, with the Taipei-listed stock up 75% so far this year, compared with a 28% gain for the broader market, giving it a market capitalization 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, although both Intel and Samsung are trying to challenge its dominance.
($1 = 32.1700 Taiwan dollars)
(Reporting by Yimou Lee, Ben Blanchard and Faith Hung; Editing by Christopher Cushing and Muralikumar Anantharaman)
