Key Takeaways
▶ Taiwan-based TSMC said on September 10 that its August revenue reached NT$514.8 billion (approximately 21.8 trillion won), up 53.3% from a year earlier. It was the company’s highest monthly figure ever and marked a fourth consecutive monthly record.
▶ Cumulative revenue from January through August totaled NT$3.3869 trillion (approximately 143.6 trillion won), an increase of 39.3% year over year. The growth was driven by a surge in orders for AI semiconductors.
▶ TSMC is simultaneously building or equipping around 20 factories in Taiwan and overseas. Even at a pace four to five times faster than in the past, the company is still unable to keep up with demand.
▶ According to Counterpoint Research, TSMC held a 73% share of the pure-play foundry market in the second quarter, compared with 7% for Samsung Electronics. The gap was 66 percentage points.
▶ TSM shares traded at $435.36 in premarket trading, down 0.83%. The stock has risen about 60% this year, prompting interpretations that expectations for strong results have already been reflected in the price.
TSMC’s revenue has broken monthly records for four consecutive months.
On September 10, contract semiconductor manufacturer TSMC announced that its August revenue was NT$514.8 billion. That equates to $16.3 billion, or approximately 21.8 trillion won. Revenue increased 53.3% from the same month a year earlier and was up 10.1% from the previous month. It was the highest monthly figure on record and marked a fourth consecutive monthly record.
Cumulative revenue from January through August reached NT$3.3869 trillion, or approximately 143.6 trillion won. This represented a 39.3% increase from the same period a year earlier.
A foundry is a business that manufactures semiconductors on behalf of design companies based on their orders. Nvidia, AMD and Apple design their chips but outsource production to TSMC.
◆ Even 20 factories are not enough
TSMC is currently building or equipping around 20 factories simultaneously in Taiwan and overseas. This is an unprecedented pace in the company’s history.
“We are currently moving four or five times faster than before, but we still cannot meet demand,” said Cliff Hou, TSMC’s deputy co-chief operating officer.
The reason for the flood of orders is AI semiconductors. Nvidia graphics processing units (GPUs) and AMD accelerators are both manufactured on TSMC production lines. AMD Chief Financial Officer Jean Hu said this week that the company “will continue to regard TSMC as its primary supplier in the wafer business.” Wafers are round silicon discs from which semiconductors are cut.
Analysts expect TSMC’s revenue this quarter to increase 46.8%. TSMC has reported revenue above market expectations for four consecutive quarters.
◆ Market share: 73% versus 7%
TSMC’s performance is directly connected to South Korea’s semiconductor industry. According to Counterpoint Research, TSMC held a 73% share of the pure-play foundry market in the second quarter of this year. Samsung Electronics held 7%. China’s SMIC followed with 5%, Taiwan’s UMC with 4% and the United States’ GlobalFoundries with 3%. The overall market grew 29% from a year earlier.
TSMC’s ability to maintain its market share is attributed to the mass production of chips using its 2-nanometer process and the expansion of its 3-nanometer process. Nanometers refer to the width of semiconductor circuit lines. The smaller the number, the better the performance and the lower the power consumption. Most of the latest AI chips require the most advanced processes.
Samsung Electronics is focusing on improving the yield of its SF2 process. Yield refers to the proportion of manufactured products that can be sold without defects. The company also benefited from higher wafer prices.
SK hynix is a memory semiconductor manufacturer, not a foundry. It is benefiting from the trend through high-bandwidth memory (HBM) used in AI data centers. This is a separate area of competition from the foundry market-share battle.
SK hynix shares fell 1.02% to 1.837 million won during intraday trading on the local stock market that day.
◆ Why didn’t the stock price rise?
Despite record results, the stock’s reaction was muted. TSM shares traded at $435.36 in premarket trading, down 0.83% from the previous closing price of $439. The 52-week range is between $256.03 and $479. The stock has risen about 60% since the beginning of this year.
Expectations for AI capital expenditure have already been reflected in the share price, leading to interpretations that the muted reaction reflected the exhaustion of the catalyst rather than disappointment with the results themselves.
The next key date is October 15, when TSMC is scheduled to announce its third-quarter results.