Taiwan Semiconductor Manufacturing Co. (TSMC), the leading manufacturer of sophisticated chips for artificial intelligence applications, is poised to announce a 5% increase in profits for the first quarter on Thursday. This growth is driven by the continued high demand for AI technology.
TSMC, the world's largest contract chip maker, serves top tech companies such as Apple and Nvidia. It has successfully navigated the reduction in demand for pandemic-driven electronics, allowing its stock to reach unprecedented levels. According to an LSEG SmartEstimate, which prioritises the most accurate analysts, TSMC's net profit for the quarter ending March 31 is expected to hit T$218.1 billion (US$6.74 billion). This marks a significant increase from last year's first-quarter net profit of T$206.9 billion.
Strong quarterly performance and optimistic forecasts
Last week, TSMC reported a 16.5% increase in first-quarter revenue, surpassing market expectations and aligning with the upper end of its forecasts. During its earnings call at 0600 GMT on Thursday, the company will discuss its outlook for the current quarter and guide the rest of the year. This will include details on capital expenditure, which is projected to be between US$28 billion and US$32 billion for this year, compared to US$30.45 billion last year.
Global expansions and market challenges
On the global stage, TSMC continues to expand its operations, particularly in the United States. Following a US$6.6 billion subsidy from the US government, TSMC has announced plans to construct a third factory in Arizona. This move comes as competitors like Intel and Samsung attempt to challenge TSMC's dominance in advanced chip manufacturing, which is essential for a range of products from mobile phones to military jets.
Intel recently reported increasing losses in its foundry business, highlighting the challenges it faces as it strives to reclaim a technological edge over TSMC. Meanwhile, ASML, a major supplier to chipmakers including TSMC, reported weaker-than-expected new bookings for the first quarter, although its sales in China remained stable despite US-led restrictions.
In summary, TSMC's robust performance this quarter, fuelled by strong demand for AI chips and strategic global expansions, underscores its leadership in the chip manufacturing industry. The company's stock has also seen a significant rise, with a 30% increase this year, outpacing the broader market's 12% gain.
