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As demand for AI chips increases, TSMC's sales grow strongly
2024-06-07 17:11uSMART

TSMC, one of the world's leading chip foundries, specializes in semiconductor manufacturing services. In its early days, it was mainly engaged in the research and development of chip production technology, and later gradually developed into one of the world's largest independent semiconductor manufacturers. Its business scope covers various fields such as computers, communications, consumer electronics, automobiles, industry, and the Internet of Things.

 

The demand for AI is optimistic, and TSMC will continue to take advantage of the trend

On June 7, TSMC disclosed that the company's sales in May were NT$229.62 billion (approximately US$7.114 billion), a year-on-year increase of 30.1%. From January to May this year, TSMC's cumulative sales reached NT$1.06 trillion (approximately US$32.839 billion), a year-on-year increase of 27%. Since the beginning of this year, TSMC's stock price has been growing strongly, from US$90 at the beginning of the year to nearly US$170.

source：uSMART

  • Optimistic about future development trends: At the shareholders' meeting on June 4, Liu Deyin, then chairman of TSMC, said that the demand for AI this year is expected to be more optimistic than a year ago. As the application of AI and chips put higher demands on the company, TSMC is confident about future growth.
  • Continuation of the original business model: Regarding the question of whether to develop and apply AI, Liu Deyin said that he does not intend to change TSMC's business model and customer competition, and does not intend to invest in AI services.
  • No stock splits, no repurchases: Liu Deyin said that there will be no stock repurchases in the future, and the company tends to directly pay more dividends to shareholders.
  • Strengthen government cooperation: TSMC also said that the company currently occupies about 8% of Taiwan's electricity, and it is expected to use 10%-12% of Taiwan's electricity by 2030. In the future, it will work closely with the government on hydropower issues.

 

TSMC will increase the price of AI chip foundry services

After the meeting, TSMC's new chairman Wei Zhejia hinted that the price of AI chip foundry services would be increased. Morgan Stanley subsequently raised TSMC's target price from NT$928 to NT$980, saying that given its value and technological advantages in the flexibility of the global chip manufacturing industry, the company can pass on its increased costs to customers. TSMC needs to increase its wafer prices in order to keep its profit margin above the target of 53% in 2025 and 2026.

In addition, Nvidia CEO Huang Renxun has also said that TSMC's wafer prices are indeed too low. Nvidia is a key customer of TSMC, accounting for 10% of TSMC's revenue in 2024. If Nvidia accepts price increases, other key AI semiconductor customers may follow suit. Goldman Sachs also said that TSMC plans to repurchase its shares at the high end of the range, the highest in its history, which should boost investor sentiment in the short term.

 

TSMC's key factors for success

  • Advanced process technology: TSMC has been committed to the research and development and investment of advanced semiconductor manufacturing technology. By continuously promoting the advancement of process technology, such as from 7 nanometers to 5 nanometers and more advanced processes, TSMC is able to provide leading chip manufacturing services to meet customers' needs for high performance and low power consumption.
  • Supply chain advantage: TSMC has a strong supply chain network and efficient production and logistics capabilities around the world. This allows customers to obtain high-quality chip products in a timely manner and maintain flexibility and competitiveness in market competition.
  • Customer diversity: TSMC's customer base is very broad, covering a variety of semiconductor manufacturers from large multinational companies to entrepreneurial companies. This diversity reduces the company's dependence on specific markets or customers, and also brings it a stable source of income.
  • Technological innovation and investment: In recent years, TSMC has continuously carried out technological innovation and invested heavily in research and development and equipment updates. This enables the company to maintain its leading position in the highly competitive semiconductor industry and continue to drive the development of the industry.

 

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