Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), a major chip supplier to Nvidia Corp, yesterday raised its revenue growth forecast for this year to 30 percent in US dollar terms, thanks to exceptionally strong demand for artificial intelligence (AI) and high-performance computing (HPC) applications.
The new revenue growth forecast surpasses the 25 percent expansion estimated by TSMC three months ago and beat almost all industry analysts’ expectations.
Booming AI demand helped propel the chipmaker’s net profit by 60.7 percent last quarter to a record high of NT$398.27 billion (US$13.54 billion), from NT$247.85 billion a year earlier. That represented a sequential increase of 10.2 percent from NT$361.56 billion.
Photo: Liao Chen-hui, Taipei Times
“The demand for AI is getting stronger and stronger, if you pay attention to what the US$4 trillion company’s CEO said,” TSMC chairman and chief executive officer C.C. Wei (魏哲家) told an investors’ conference in Taipei.
Wei was referring to Nvidia CEO Jensen Huang’s (黃仁勳) comments on AI demand.
“Recent developments are also positive to AI’s long-term demand outlook. The explosive growth in token volume demonstrates increasing AI model usage and adoption, which means more and more computation is needed, leading to more leading-edge silicon demand,” Wei said.
Robust AI and HPC demand is leading to supply constraints of TSMC’s 3-nanometer and 5-nanometer chips, as well as demand for its advanced chip-on-wafer-on-substrate packaging capacity, Wei said.
Last quarter, 3-nanometer and 5-nanometer chips contributed 60 percent to TSMC’s total revenue.
“We are working very hard to narrow the gap between demand and supply,” Wei said.
TSMC expects 3-nanometer chip supply constraints will last for several years.
The company’s revised revenue growth forecast did not factor in potential increases from Nvidia’s H20 chips after the US this week removed the export restrictions on such chips to China.
“We have not received the signal yet,” Wei said. “But certainly, this is good news... China is a big market and my customers can still continue to supply the chips to the big market. It’s very positive news for them and in return it’s very positive news for TSMC.”
TSMC expects revenue in the third quarter to expand to between US$31.8 billion and US$33 billion, representing about 8 percent growth sequentially or 38 percent annually. That factored in the negative impact of a stronger New Taiwan dollar against the US dollar.
The chipmaker assumed that the NT dollar would appreciate 6.6 percent against the greenback this quarter to an average of NT$29.
Gross margin would drop to between 55.5 percent and 57.5 percent this quarter from 58.6 percent in the second quarter, TSMC said, adding that the NT dollar’s appreciation would reduce gross margin by about 2.6 percentage points.
The forecast also includes the gross margin dilution from its overseas fabs in the US and Japan, it said.
To hedge foreign exchange risks, TSMC injected US$10 billion into its fully owned subsidiary TSMC Global, which effectively reduced the company’s US dollar exposure during a period of rapid NT dollar appreciation, the company said.
TSMC booked non-operating income of NT$29.61 billion last quarter, up from NT$23.82 billion in the first quarter.
The chipmaker yesterday that the long-term gross margin target of 53 percent and even higher remains to be achievable, despite unfavorable foreign exchange rates and tariff policy uncertainty.
TSMC yesterday said it is speeding up chip production schedule by several quarters at its factories in Arizona to cope with robust demand from its leading US customers.
TSMC counts US major technology companies from Nvidia, Apple Inc and Advanced Micro Devices Inc to Qualcomm Inc as its key customers.
TSMC plans to build six advanced chip manufacturing fabs in Arizona to create a chip manufacturing cluster, with the third fab under construction. The third fab is to utilize the company’s 2-nanometer and more advanced A16 process technology, with 3-nanometer and 4-nanometer technologies used at its second and first fabs.
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