On October 17th, TSMC released its Q3 2024 financial report. The company's third quarter revenue reached $23.5 billion, a year-on-year increase of 39%; The gross profit margin reached 57.8%, an increase from 54.3% in the same period last year; The net profit reached 10.1 billion US dollars, a year-on-year increase of 52%, significantly exceeding the previous market expectation (estimated by the London Stock Exchange Group) of 9.48 billion US dollars.
The company remains optimistic about continued growth in the next quarter, with expected sales of $26.1 billion to $26.9 billion, a year-on-year increase of 33% to 37%, and gross profit margin growth of 57% to 59%.
Based on such a strong momentum, TSMC predicts that the annual revenue growth for 2024 will reach 30%, exceeding the target of 20% to 25% set in June this year.
The reason for achieving unexpected growth is mainly driven by AI. As one of the biggest beneficiaries of the explosion of generative AI computing power chips, TSMC has almost monopolized the OEM orders for AI server chips from manufacturers such as NVIDIA, AMD, and Intel, earning a lot of money.
TSMC's management revealed during the earnings call that the company's AI server revenue contribution this year is more than three times that of last year, and "almost all innovators in the field of artificial intelligence are collaborating with TSMC
Semiconductor research firm TrendForce believes that AI server chips (mainly GPUs, including FPGAs, ASICs, etc.) have been driving demand growth in the semiconductor market for two years. By 2025, the global wafer foundry industry will see a 20% growth in output value, with TSMC accounting for over 60% of the global market share and continuing to dominate. Semiconductor foundries such as Samsung and TSMC are also expected to achieve an annual growth rate of nearly 12%.
TSMC believes that the demand for artificial intelligence is just beginning and will continue for many years to come. CEO Wei Zhejia is even more optimistic, stating that the company will maintain "healthy growth" for the next five years.
In addition to the growth brought by AI servers, the mobile phone industry has also begun to collectively shift towards 3-nanometer processor chips this year. The iPhone 15 released by Apple last year and the new iPhone 16 released this year both use TSMC's 3-nanometer technology, and Qualcomm and MediaTek have also released their flagship 3-nanometer processors. According to Taiwan's Economic Times, TSMC's 3-nanometer production capacity is in short supply, and its four major clients, Nvidia, Apple, AMD, and Qualcomm, have already contracted all of their 3-nanometer production capacity for this year.
According to financial reports, TSMC's advanced processes (including processes with a size of 7 nanometers and below) currently account for 69% of the quarter's wafer sales revenue, while mature processes (28 nanometers and above) account for approximately 31%. In advanced processes, shipments of 3-nanometer processes accounted for 20% of the company's wafer sales in the third quarter of 2024, shipments of 5-nanometer processes accounted for 32%, and shipments of 7-nanometer processes accounted for 17%.
On the day before TSMC released its financial report, Dutch lithography machine giant ASML's stock price plummeted by 16% due to its financial report falling short of market expectations, causing a global chip stock shock. ASML stated in its financial report that although there are growth opportunities such as AI, the recovery of the global semiconductor market from the trough cycle in 2022 and 2023 is "far below expectations". Large customers of logic chips and storage chips generally remain cautious, and the only growth in the market comes from AI products such as AI GPU, HBM, and DDR5. This situation is expected to continue until 2025.
Regarding the future direction of the semiconductor market that the outside world is concerned about, Wei Zhejia stated that the demand for artificial intelligence is "real", and the entire semiconductor market is currently stable in demand and is beginning to improve.
Stimulated by positive financial news, TSMC's stock price surged 6.4% after trading, with the company's latest market value reaching $972.3 billion, approaching its historical high of $1 trillion.
During the earnings conference interview, Wei Zhejia also answered questions about the progress of overseas factory construction that the outside world is concerned about.
In terms of US factories, as a key project subsidized by the US chip bill, TSMC's first wafer fab project in Arizona is progressing smoothly and is expected to achieve mass production by 2025, with "high output" expected. The second wafer fab will begin mass production in 2028, while the third wafer fab will begin mass production before 2034.
Previously, multiple media outlets such as The Wall Street Journal and The New York Times reported that TSMC's construction of a factory in the United States encountered "out of place" issues such as power and water shortages. But according to Wei Zhejia, the company has received guarantees from the local government that it will receive sufficient power, water, and land support.
In Germany, TSMC, Bosch, Infineon, and NXP jointly plan to build a joint venture plant in Dresden, which is also one of the key support projects under the EU's 43 billion euro chip bill. The German factory will start mass production in 2027.
In addition, TSMC announced in February this year the establishment of a wafer fab in Kumamoto Prefecture, Japan. The fab has officially begun operations and is currently progressing smoothly, with mass production starting this quarter. It also plans to build a second factory in Kumamoto, which is expected to begin construction in 2024 and officially operate by the end of 2027.
Another attending analyst asked on site whether TSMC is considering acquiring Intel's wafer foundry business, which is currently in crisis. In response, Wei Zhe Jia stated that he is "not interested".