Taiwan Semiconductor (TSMC) (NYSE:TSM,TPE:2330), the world’s largest contract chipmaker, reported a strong 39.6 percent year-over-year increase in revenue for September 2024.
Based on this, the company’s Q3 earnings beat analysts’ expectations and the company’s own guidance, rising 36.5 percent year-over-year. For the quarter ending September 30, TSMC posted revenues of NT$759.7 billion (US$23.5 billion), surpassing the projected NT$748 billion. The company will disclose its full Q3 earnings report on October 19.
Bloomberg reported that the company’s performance has eased concerns over a potential slowdown in demand for artificial intelligence (AI) hardware, which has been a significant driver of the global semiconductor market in recent years.
The company’s success punctuates the continuing demand for cutting-edge chips essential to powering AI applications, cloud computing and other high-performance technologies. Currently, the company now derives more than half of its revenue from the high-performance computing (HPC) segment.
Since 2020, TSMC’s sales have more than doubled as demand for high-performance chips surged alongside generative AI and machine learning technologies. A significant portion of TSMC’s growth can be attributed to AI hardware, with Nvidia (NASDAQ:NVDA), the leading producer of AI chips, continuing to see high demand for its GPUs.
These components are crucial for training large AI models, a field that has experienced explosive growth since the launch of generative AI systems like OpenAI’s ChatGPT.
TSMC’s US market expansion
TSMC’s continued expansion into the AI sphere is also reflected in its increasing efforts to invest in the US market.
The company’s Fab 21 facility in Arizona, which is still ramping up production, is part of TSMC’s broader strategy to localize chip manufacturing to better serve its North American clients.
Apple (NASDAQ:AAPL), which relies on TSMC for its iPhone processors, is already producing some of its A16 chips at the Arizona fabrication facility. Reports suggest that AMD (NASDAQ:AMD) is set to become a major client of the facility, with production of AMD’s chip potentially starting as early as 2025.
Additionally, TSMC has continued to explore new areas of growth, including advanced packaging technologies such as chip-on-wafer-on-substrate (CoWoS). These advanced packaging solutions are critical for improving the performance and efficiency of AI processors.
Additionally, while chips produced at the Arizona fab currently need to be shipped overseas to be packaged, these solutions will eventually enable TSMC to complete the packaging process in the Arizona facility thanks to a recent partnership with Amkor Technology (NASDAQ:AMKR).
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.