Taiwan Semiconductor Manufacturing Company (TSMC) just reported solid results for the fourth quarter, showing a 35% profit increase. This surge came from strong demand for AI chips. Let’s break down the details.
Strong Financial Performance
In the latest quarter, TSMC earned a net income of NT$505.74 billion (around $16.4 billion), surpassing estimates. Revenue hit NT$1.046 trillion ($33.73 billion), just above forecasts. It’s notable that TSMC has seen consistent profit growth for eight quarters in a row. This clear upward trend highlights the robustness of their business.
During an earnings call, Chief Financial Officer Wendell Huang stated that the demand for TSMC’s advanced chip technologies remains high. He expects revenue for the current quarter to reach between $34.6 billion and $35.8 billion, reflecting both sequential and year-over-year growth.
AI Driving Demand
A significant chunk of TSMC’s revenue comes from its high-performance computing division, which focuses on AI and 5G technologies. In the last quarter, this segment made up 55% of their sales, while smartphone sales contributed 32%. Advanced chips with a size of 7 nanometers or smaller accounted for 77% of their wafer revenue.
This increase in smaller chip sizes improves processing speeds and energy efficiency, key factors in the booming tech world. TSMC is pushing to expand its 2nm chip production, which could keep them at the forefront of the industry.
Expert Insights
According to senior analyst Jake Lai from Counterpoint Research, the demand for AI chips is set to grow even further, marking 2026 as a potential breakout year for AI server demand. He emphasizes that with TSMC’s plans for 2nm capacity expansion, they are well-positioned for continued strong performance. However, he also cautions that issues like memory shortages could impact sales in consumer electronics.
Global Expansion Plans
TSMC is not just focusing on Taiwan; they are also expanding internationally. Significant projects are underway in Japan, Europe, and Arizona, where they recently acquired more land to build additional facilities. C.C. Wei, TSMC’s CEO, explained that this expansion aims to boost productivity and better serve U.S. customers.
However, it’s important to note that plants outside Taiwan may face lower profit margins. Global tariff policies remain a concern, with potential impacts as the company expands.
In summary, TSMC’s strong performance reflects the growing demand for advanced chips, particularly in AI. As they expand globally, they look to balance challenges with opportunities for growth.
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