TSMC Projects 40% Profit Increase in Q3 Amid Rising AI Chip Demand

Taiwan Semiconductor Manufacturing Co. (TSMC) Anticipates 40% Surge in Q3 Profits Amid AI Chip Demand

By Ben Blanchard and Faith Hung

TAIPEI (Reuters) - Taiwan Semiconductor Manufacturing Co. (TSMC), the leading producer of advanced chips crucial for artificial intelligence applications, is poised to announce a remarkable 40% increase in third-quarter profits. This surge is driven by the escalating demand for AI technology.

TSMC, the world's largest contract chipmaker, counts tech giants like Apple (NASDAQ:AAPL) and Nvidia (NASDAQ:NVDA) among its clients. The company is expected to report a net profit of T$298.2 billion ($9.27 billion) for the quarter ending September 30, according to LSEG SmartEstimate, which aggregates insights from 22 analysts, prioritizing the most reliable forecasts.

This projected profit marks a significant rise from the T$211 billion reported in the third quarter of 2023. TSMC recently reported a substantial increase in third-quarter revenue in Taiwan dollars, surpassing market predictions. The company provides its revenue forecasts in U.S. dollars during its earnings conferences.

Li Fang-kuo, chairman of President Capital Management, commented, “Most of TSMC’s major clients, including Apple, Nvidia, AMD (NASDAQ:AMD), Qualcomm (NASDAQ:QCOM), and Mediatek, are launching new products that heavily rely on TSMC’s advanced process technologies. TSMC’s Q3 earnings will significantly exceed expectations.”

During the quarterly earnings call scheduled for Thursday at 0600 GMT, TSMC will update its outlook for the current quarter and the entire year, including capital expenditure plans as it accelerates production expansion.

TSMC is investing billions in new overseas factories, notably $65 billion for three plants in Arizona, USA, although the majority of manufacturing will remain in Taiwan. In its previous earnings call in July, TSMC increased its full-year revenue forecast and adjusted its capital expenditure plans for 2023 to between $30 billion and $32 billion, up from the earlier estimate of $28 billion to $32 billion.

The AI boom has significantly boosted TSMC's stock price, with the Taipei-listed shares soaring 77% this year, outpacing the broader market's 28% gain. Known as the "sacred mountain protecting the country," TSMC plays a pivotal role in Taiwan's export-driven economy and faces minimal competition.

Meanwhile, Intel (NASDAQ:INTC), once a dominant player in the semiconductor industry, is struggling as it attempts to build a contract manufacturing unit to compete with TSMC, facing substantial losses.

($1 = 32.1570 Taiwan dollars)