In the ever-evolving landscape of semiconductor manufacturing, Taiwan Semiconductor Manufacturing Company (TSMC) has emerged as a pivotal player, particularly with its remarkable fourth-quarter results that have significantly outperformed industry expectations. The company’s performance underscores not just its strong operational strategy, but also the continuing surging demand for advanced chips, especially those catering to artificial intelligence (AI) applications. This article analyzes TSMC’s recent successes while also contemplating the challenges ahead.
In the fourth quarter, TSMC reported net revenue of NT$868.46 billion (approximately $26.36 billion), surpassing analyst expectations of NT$850.08 billion. Alongside, the company’s net income reached NT$374.68 billion, exceeding the anticipated NT$366.61 billion. Notably, TSMC’s profit experienced a staggering 57% increase from the previous year, reaching record levels, while revenue rose by an impressive 38.8%. TSMC had forecasted its fourth-quarter revenue to be between $26.1 billion and $26.9 billion, and the actual results display not only a robust internal performance but also a resilient market demand.
What drives these impressive figures? A significant portion of TSMC’s success stems from its high-performance computing (HPC) division, which includes AI and 5G technology. This segment was responsible for 53% of TSMC’s total revenue, marking a 19% increase compared to the previous quarter. Analysts, including Brady Wang from Counterpoint Research, attributed the surging demand primarily to AI chip requirements, alongside increased requirements stemming from Apple’s latest iPhone model.
2024 turned out to be a monumental year for TSMC, with total annual revenue accumulating to NT$2.9 trillion—setting a record since the company’s initial public offering in 1994. Such robust sales figures not only highlight TSMC’s dominance in the semiconductor industry but also reflect the broader trends favoring AI technologies. According to TSMC’s chief financial officer Wendell Huang, the demand for AI accelerator products is anticipated to occupy an increasingly larger segment of total revenue, projected to make up “close to a mid-teens percentage” in 2024. Huang asserts that even with a projected threefold increase in sales from AI-related products, the company forecasts that this sector could double again by 2025.
This unwavering demand for semiconductors, particularly those catering to AI applications, signifies a substantial shift in technology consumption patterns, benefiting TSMC in ways that few could have anticipated.
However, despite the optimistic outlook, TSMC is not impervious to potential obstacles. The company may encounter headwinds in 2025 amidst evolving geopolitical tensions, particularly those related to U.S. export restrictions concerning advanced semiconductors to China. Moreover, with trade policies in flux under President-elect Donald Trump, uncertainties loom large. The Trump administration’s past criticisms of Taiwan regarding the perceived “theft” of American chip technology underscores the fragile nature of international semiconductor trade.
In light of these challenges, TSMC must strategically navigate this complicated landscape, maintaining its competitive edge while safeguarding its significant market share against potential disruptions. Counterpoint’s Wang remains optimistic, predicting another strong year for TSMC in 2025, backed by continued robust demand and an expansion in AI applications.
As a bellwether for the semiconductor sector, TSMC’s successes have cascading effects on the market. Following their stellar performance, stocks of TSMC surged, rising 81% in 2024, reflecting investors’ confidence in the company’s trajectory. This upward momentum extended to other semiconductor firms listed on European exchanges, indicating a healthy and interconnected semiconductor ecosystem.
TSMC’s fourth-quarter results not only highlight an extraordinary performance driven by the AI revolution but also present a microcosm of the semiconductor industry grappling with both immense opportunities and significant challenges. As the world leans increasingly into AI-centric innovations, the coming years will be decisive for TSMC and its competitors alike in navigating the future landscape of technology.