When the semiconductor industry debate over whether the sector has already peaked, the world’s largest foundry company responded with results. TSMC’s record quarterly earnings, which far exceeded market expectations, together with its expanded investment plans, are adding weight to the view that the AI semiconductor supercycle remains intact.
According to industry sources on the 16th, TSMC’s second-quarter net profit reached 706.6 billion New Taiwan dollars, or about 32.5 trillion won, up 77 percent from a year earlier. That was well above the market forecast of 632.6 billion New Taiwan dollars. Revenue rose 36 percent to 1.27 trillion New Taiwan dollars, or about 58.6 trillion won. Gross margin came in at 67.7 percent, and operating margin reached 60.3 percent.
◆ A message heavier than earnings: more investment
The market’s main focus was not the earnings themselves, but the company’s outlook for the second half of the year.
TSMC raised its capital expenditure plan for this year from the previous range of US$52 billion to US$56 billion to US$60 billion to US$64 billion, an increase of up to 14 percent. It also lifted its annual dollar-based revenue growth forecast from “more than 30 percent” to “more than 40 percent.” In the earnings conference call, TSMC Chairman and CEO C.C. Wei said, “AI-related demand remains very strong.”
The company is also increasing its investment in the United States. TSMC decided to inject an additional US$100 billion, or about 148 trillion won, into its Arizona manufacturing facilities. That brings its cumulative investment there to US$265 billion. The additional funds will be used to build a 2-nanometer mass-production fab and an advanced packaging plant. The company said the move is intended to meet long-term demand from major U.S. customers.
◆ Foundry orders are a leading indicator of demand
In the semiconductor industry, concerns about a “peak-out” have recently gained traction, based on slowing memory price gains and AI investment fatigue. TSMC’s latest announcement points in the opposite direction.
Because foundries produce chips based on customer orders, they are among the first to feel demand for AI chips. “Exceeding expectations in both earnings and investment means AI demand is much more resilient than many thought,” said one industry source.
The details of the results also support that view. Utilization of advanced 3- and 5-nanometer processes used for AI server chips remained high, while demand for advanced packaging, such as CoWoS, also increased. June revenue reached 442.68 billion New Taiwan dollars, a monthly record. The market expects expansion of 2-nanometer mass production and CoWoS capacity to continue for the time being.
◆ Spillover to Korea’s memory industry
TSMC’s expansion is directly linked to Korea’s semiconductor industry. As TSMC increases production of AI chips for big tech companies such as Nvidia, demand for high bandwidth memory, or HBM, embedded in those chips also rises. HBM is supplied by SK Hynix and Samsung Electronics.
Samsung Electronics announced preliminary second-quarter results of a record 171 trillion won in revenue and 8.94 trillion won in operating profit, driven by the AI memory boom. SK Hynix, which is due to report earnings later this month, is also expected to post record results as AI server investment expands and HBM demand increases.
The key point to watch is the lag between demand and supply. Market observers say the length of the supercycle will depend on whether AI infrastructure investment continues until next year and beyond, when TSMC’s planned capacity expansion begins to translate into actual shipments. For now, with foundries and memory pointing in the same direction, the weight of the peak-out debate appears to be tilting toward sustained demand.