By Wen-Yee Lee, Faith Hung and Ben Blanchard
TAIPEI, April 16 (Reuters) – TSMC raised its annual revenue forecast on Thursday and said it was stepping up capital spending this year as the world’s biggest contract manufacturer of advanced AI chips scrambles to meet relentless hunger for its products.
The bullish outlook comes after the company, a major supplier to Nvidia, said first-quarter profit leapt 58% to a record T$572.5 billion ($18.2 billion), comfortably beating expectations and marking its eighth straight quarter of double-digit growth.
Chief Executive C.C. Wei told an analysts call that TSMC was being prudent in planning due to macroeconomic uncertainties from the Middle East conflict and also said that AI-related demand continued to be “extremely robust” – remarks likely to ease investor concerns about the impact of the war.
“Our conviction in the multi-year AI megatrend remains high, and we believe the demand for semiconductors will continue to be very fundamental,” he told an earnings call with analysts.
Full-year revenue in U.S. dollar terms would grow more than 30%, compared with a previous forecast of close to 30%, while capital expenditure would be at the high end of its earlier guidance of $52 billion to $56 billion, he added.
EXPANDING 3-NM PRODUCTION
Production capacity remains very tight, Wei said.
TSMC said it is expanding its 3-nanometre wafer capacity – which is used to produce AI chips – across Taiwan, the United States and Japan, allowing it to mass produce in greater quantities over 2027 and 2028.
Its 3-nm production plans in the U.S. are part of a whopping $165 billion planned investment in chip factories in the state of Arizona.
“We already knew strong revenue was there, but pleasingly we are also seeing really strong margins and high utilisation. Essentially, TSMC’s fabs are running hot and the AI story just keeps delivering,” said Ben Barringer, head of technology research at Quilter Cheviot.
For the current quarter, it forecast sales between $39 billion and $40.2 billion. That compares with $30.1 billion in the same period last year and $35.9 billion in the first quarter.
First-quarter results showed that revenue from advanced 3-nm chips now accounts for a quarter of the company’s sales, up sharply from just 6% in the third quarter of 2023.
SAFETY STOCKS ON HAND FOR HELIUM, HYDROGEN
The huge demand for high-performance chips required for AI workloads has driven Asia’s most valuable company to new heights.
TSMC’s Taipei-listed shares have gained 35% so far this year and ahead of the earnings results, they finished 0.2% higher at a record T$2,085. Its market capitalisation is now nearly double that of South Korean rival Samsung Electronics at around $1.7 trillion.
The war in the Middle East is threatening to disrupt the supply of production materials for semiconductors such as helium and hydrogen, but TSMC said it had safety stock on hand and sources from multiple suppliers in different regions.
The potential for greater competition has grown after Elon Musk last month announced plans for Tesla to build a “Terafab”, an advanced AI chip complex in Austin. Intel said last week it would join the project.
Wei said the company would not be underestimating its rivals, but added there are “no shortcuts” in this industry as it takes two to three years to build a new fab, noting that both companies were still TSMC customers.
“We are very confident about our technology position,” he said.
($1 = 31.5180 Taiwan dollars)
(Reporting by Wen-Yee Lee, Faith Hung and Ben Blanchard; Editing by Miyoung Kim and Edwina Gibbs)
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