No Slowdown At TSMC, Thanks To The AI Gold Rush
With a near monopoly on advanced chip manufacturing and packaging, it is no wonder that during the AI boom that the world’s largest foundry is not only making money. But it is a wonder that TSMC is not extracting even more revenue and profits from its customers than it does.
The only explanation, even as TSMC is contemplating price hikes to cover rising electricity and other costs in 2025, is that company founder Morris Chang and chief executive officer CC Wei have grasped the secret of life: Know when you are already winning.
In the quarter ended in September, revenues at TSMC rose by 36 percent to $23.5 billion and net income rose by a stunning 51 percent to $10.06 billion, meaning that 42.8 percent of revenues fell to the bottom line. That is a level that is higher than the average of 37.8 percent of revenues between Q1 2018 and Q2 2024, but it is by no means the peak level TSMC has ever hit. That stretch between Q1 2022 and Q2 2023, when 7 nanometer processes were mature and 5 nanometer processes were ramping, and GenAI had just Big Banged was at about the same level. It is only the ramp of 4 nanometer, 3 nanometer, 2 nanometer, and 1.6 nanometer processes in recent years that has put a damper on profits; slumping sales of PCs and smartphones also did not help matters.
But with AI server sales booming, the PC market recovering, and smartphones more or less steady – and all three kinds of devices showing growth year on year and sequentially – TSMC was able to break the $10 billion mark in net earnings for the first time in its history. And perhaps most importantly given that the future of chip making is now a lot more expensive than in the past, that net income allowed TSMC to grow its cash and equivalents pile to $68.51 billion. And through prudence, it is managing to keep its capital expenses for the year at somewhere between $31 billion and $32 billion even as it is growing.
