TSMC's Q3 Revenue Soars, AI-Driven Stock Hits New High
TSMC,which has significantly benefited from the wave of AI development,has delivered a financial report that greatly exceeded expectations.
On October 17th,TSMC released its financial report for the third quarter,showing that net income,gross margin,operating profit margin,and other indicators all surpassed the performance expectations given by the management in the second quarter,especially with a significant increase in gross margin.Influenced by this news,TSMC's pre-market stock price in the U.S.surged by more than 9%,and after the opening,it even broke a 13% increase,with the stock price breaking through $200 per share to reach a historical high,and the total market value broke through one trillion U.S.dollars.
The financial report shows that in the third quarter,TSMC achieved revenue of $23.5 billion,a sequential increase of 12.9% and a year-on-year increase of 36%; net profit attributable to the parent company's shareholders was 325.26 billion New Taiwan dollars (approximately $10.12 billion),a year-on-year increase of 54.2% and a sequential increase of 31.2%; the net profit margin was 42.8%,a sequential increase of 6 percentage points and a year-on-year increase of 4.2 percentage points.However,the 3nm process is still in the capacity ramp-up stage,which has a certain dilution effect on the profit margin.
Traditionally,the third quarter has been the peak season for high-end smartphone inventory,which drives an increase in demand for smartphone-related market,but compared to last year,the momentum of smartphone-related business this year is lower than that of AI.
This means that the current demand for mobile phones and PC terminals is still in a moderate recovery phase,but the industry believes that the previously pressured automotive and industrial control terminal markets are gradually recovering.
Overall,TSMC achieved good profitability in the third quarter.
During the period,the company achieved a gross margin of 57.8%,an increase of 4.6 percentage points sequentially and 3.5 percentage points year-on-year.This gross margin performance is far higher than the expected range of 53.3% to 55.5% given by the management in the previous financial report.The management pointed out that this was due to higher capacity utilization and more favorable exchange rates.
TSMC Senior Vice President and Chief Financial Officer,C.C.Huang,said that the increase in revenue in the third quarter was supported by strong demand from the smartphone and AI-related markets for 3nm and 5nm process technologies.Entering the fourth quarter,it will continue to be supported by strong demand for advanced processes.
From the perspective of revenue contribution from process technology,the proportion of 3nm process increased by 5 percentage points quarter-on-quarter to 20%,while the 5nm process decreased by 3 percentage points quarter-on-quarter to 32%.Overall,mature processes below 7nm accounted for 69% of the total revenue contribution.
From the terminal market perspective,although it has entered the peak season for high-end smartphone inventory,the revenue contribution proportion gap between HPC and mobile phones has widened.In the report,High-Performance Computing (HPC) accounted for 51% of total revenue (a decrease of only 1 percentage point from the previous quarter),while smartphones accounted for 34%.The sequential growth rates of these two businesses ranked third (+11%) and second (+15%) highest among all end markets at TSMC; the highest sequential growth rate was in the IoT category,with a 35% increase,although its contribution to TSMC's overall revenue was 7%,showing no significant increase in terms of proportion.
Comparing the third quarters of 2022 and 2023,smartphone revenue as a percentage of TSMC's total revenue could climb to around 40% during the peak season,
but in 2024,it appears to have relatively insufficient momentum.
During the earnings call,TSMC executives believed that the overall growth of the mobile phone and PC markets is still in the low single-digit percentage range.However,considering that the market is exploring more AI functions,the demand for AI chips in mobile phones will grow faster than the terminal growth rate,and it is estimated that these two major end markets will gradually increase in the future.
The day before TSMC released its financial report,ASML's financial report was considered to be below industry expectations,which affected a significant fluctuation in U.S.technology stocks.However,at the earnings call,TSMC executives clearly pointed out that AI-related demand is very solid and sustainable.According to one of the company's customers,the demand for AI shows an "insane" sentiment,and it is still in the early stage of AI demand.
The advanced packaging CoWoS capacity,which has been a focus,is still in short supply.Executives believe that even if TSMC has doubled its capacity this year and continues to double it next year,it will still not be enough.
From a regional perspective,the revenue contribution from North American customers to TSMC has further increased to 71%.In the previous quarter and the same period last year,the revenue proportion from North American customers was still in the range of 65% to 69%.This shows that Apple and NVIDIA have formed a closer business dependence with TSMC.Although the Chinese market is still the second-largest regional market contributing to TSMC's revenue,the proportion in the third quarter was 11%,which is very close to the proportion of the Asia-Pacific market excluding China (10%).
Although the demand for mobile phones is still in a moderate recovery phase,other major end markets have shown signs of stabilization.
TSMC's financial report shows that the automotive market,which had been sluggish for several quarters,achieved a 6% sequential growth in revenue in the third quarter and a 5% sequential growth in the second quarter; the IoT market also continued to grow in the second and third quarters.
TrendForce Consulting believes that the inventory of application components such as automotive,industrial control,and general-purpose servers has been corrected to a healthy level in 2024,and in 2025,it will join the sporadic stockpiling ranks.It is expected that the utilization rate of mature process capacity will increase by 10 percentage points,breaking through 70%.
The agency points out that with the continuous promotion of AI and the support of the bottoming out of various application component inventories,the revenue growth of the wafer foundry industry in 2025 will return to the 20% level.However,manufacturers still need to face many challenges,including the impact of the global economy on terminal consumer demand,whether high costs will affect the strength of AI layout,and whether expansion will increase capital expenditure.Data indicates that the average capacity utilization rate of major wafer fabs in the third quarter of 2024 was approximately 80%,marking a year-over-year increase of about 5 percentage points and a sequential increase of about 1 percentage point.
In terms of mature process technologies,on one hand,the demand for mid-to-low-end consumer electronics is gradually recovering,prompting the supply chain to actively stock up.On the other hand,the ongoing impact of geopolitical factors has encouraged downstream clients to pull in shipments,leading to a significant rebound in the overall capacity utilization rate for mature processes.It is expected that in the fourth quarter of 2024,the average capacity utilization rate for major wafer foundries is likely to recover to around 81% to 82%,with foundry prices stabilizing and potentially seeking increases.Overall,the price reduction trend for mature processes has come to an end.