TSMC once again skimmed the cream of the AI ​​boom – quarterly profit soared 57% to a record $11.4 billion

The Taiwanese company TSMC traditionally demonstrates its ability to quickly summarize the financial results of the past quarter, reporting the results of the period among the first participants in the semiconductor components market. News outlets were particularly encouraged by the contract chipmaker’s 57% net profit growth in the fourth quarter. Annual revenue grew 33.9% in Taiwanese currency terms.

Image source: TSMC

TSMC’s quarterly revenue exceeded market expectations and grew by 38.8% year-on-year to $26.36 billion. Net profit was also higher than expected, increasing by 57% to a record $11.4 billion. From the point of view of TSMC itself, its quarterly revenue was within in the forecast range from $26.1 to $26.9 billion, although it turned out to be less distant from its middle.

As noted in the TSMC report, the company’s revenue for the full year grew by 33.9% in local currency, and in US dollars it increased by 30% to $90.08 billion. At the same time, the profit margin increased by almost two percentage points to 56.1 % compared to 2023, and the operating profit margin increased from 42.6 to 45.7%. Over the past year, TSMC shares in their historical homeland increased in price by 81%, and the publication of the quarterly report raised their rate by another 3.75%.

Bloomberg Intelligence analysts expect that this year TSMC’s revenue will be driven up not only by the artificial intelligence segment, but also by smartphones and personal computers, which will also acquire processors with the function of accelerating core operations. It is possible that Intel will increase the number of components ordered from TSMC for production, and will also master the production of chips for Wi-Fi 7 controllers. Morgan Stanley experts expect that TSMC’s revenue will increase by a little over twenty percent this year.

TSMC management noted that for the current quarter it expects comparable revenue growth of 37% to values ​​in the range of $25 to $25.8 billion. This is 6% above analysts’ expectations. Capital expenditures this year will be 41% higher than last year, falling within the range of $38 billion to $42 billion.

By the way, if revenue in the last quarter grew by 38.8% in the national currency of Taiwan, then the volume of processed silicon wafers increased only by 15.6%, which indicates accelerated revenue growth due to an increase in average prices for TSMC services. Sequentially, fourth-quarter revenue grew 14.3%, largely driven by strong demand for 3nm and 5nm processes. The former accounted for a decent 26% of TSMC’s revenue in the fourth quarter, while the latter maintained a share of 34%, not much down from last year’s 35%. Compared to them, the 7nm process seems like an old-timer, but it also provided 14% of TSMC’s revenue in the fourth quarter. Thus, 74% of the company’s quarterly revenue was provided by advanced technological processes with standards of 7 nm and thinner.

In terms of market segments, the high-performance computing sector, which includes accelerators for artificial intelligence systems, has quite predictably emerged. It accounted for 53% of TSMC’s revenue last quarter, up a solid ten percentage points year over year and growing revenue 19% sequentially. Against this background, the smartphone segment consistently grew from 34 to 35%, but a year ago it was on par with the HPC segment and occupied 43% of the company’s revenue. However, TSMC’s smartphone component revenue grew 17% sequentially. The automotive segment increased revenue by 6% on a sequential basis, but its share of the total fell from last year’s 5% to 4%. Internet of Things revenue declined 15% sequentially, but contributed 5% of TSMC’s total revenue last quarter. Consumer electronics decreased revenue by 6%, its share of TSMC’s total revenue decreased from 2 to 1%.

Geographically, the concentration of TSMC’s revenue sources in North America increased from 72 to 75% at the end of the fourth quarter. China reduced its share from 11 to 9%, which was probably facilitated by numerous sanctions from the United States and its allies. The Asia-Pacific region increased from 8 to 9%, although in the third quarter of last year its share reached 10%. Japan sank from 5 to 4%, although as local production expands, it may regain some of its lost positions. Countries in Europe, the Middle East and Africa reduced their positions from 4 to 3%. For the year as a whole, North America accounted for 70% of TSMC’s revenue, with China losing one percentage point to 11%.

At the end of the year as a whole, the share of the 3-nm process technology in TSMC’s revenue reached 18%, while 5-nm and 7-nm process technologies were responsible for 34 and 17% of the company’s revenue for the period, respectively. It turns out that if in 2023 advanced technical processes formed 58% of TSMC’s revenue, then in 2024 their share increased to 69%. By market segment, high-performance computing accounted for 51% of TSMC’s annual revenue, while smartphones accounted for 35%. At the same time, the first segment increased its share of revenue by 58%, and smartphones were limited to an increase of 23%.

TSMC ended the year with almost $65 billion in cash, so it can finance its current activities without much difficulty, but it plans to increase capital expenditures this year by 41%, as noted above. Last year, $29.76 billion was spent on related needs, of which $11.23 billion fell in the fourth quarter. Analysts expected that TSMC would increase capital expenditures this year only slightly, but the company’s own forecast exceeded their expectations by 19% at the upper limit of the range. TSMC will use advanced technologies at the Arizona facility, but management declined to provide a specific timetable for their implementation.

TSMC management made it clear at the quarterly conference that in volume terms the smartphone market will grow by less than 5% this year, but some recovery in demand will be observed outside the AI ​​segment. Overall, TSMC expects revenue growth of 24% to 26% this year, in line with market expectations. The weakness of the smartphone market will not prevent the AI ​​segment from driving the company’s business, according to management.