TSMC’s Net Profit in the Third Quarter Increased by 54% Year-on-Year

In recent years, the competition in the global semiconductor industry has become increasingly fierce, with many companies competing for a larger market share. Against this backdrop, TSMC has shown an extraordinary growth against the trend, with its financial performance in the third quarter of 2024 being particularly impressive. According to the latest report, TSMC achieved a net profit of NT$325.3 billion in the quarter, an increase of 54% compared with the same period last year, significantly exceeding the market’s previous estimate of NT$299.3 billion. What kind of development trend does TSMC’s performance that exceeded expectations release?

TSMC’s net sales in the third quarter totaled $23.5 billion, which exceeded the company’s original sales range of $22.4 billion to $23.2 billion by $300 million. TSMC’s net sales in September increased by 39.6% compared with the same period in 2023, a growth rate not seen since July 2024. This growth momentum is inseparable from the booming consumption in the artificial intelligence market, which has driven technology companies to continue to increase their investment in the latest artificial intelligence chips. For chip manufacturers with strategic advantages like TSMC, this trend is undoubtedly extremely good news.

Prior to this, TSMC’s second quarter also brought “surprise” performance. In this quarter, TSMC’s sales reached NT$673.5 billion and operating profit was NT$286.2 billion. Compared with the previous quarter, sales increased by 13.6%, and compared with the same period last year, it increased by 40.1%, which exceeded the general expectations of the securities market by 2.1%. Similarly, operating profit also achieved a month-on-month increase of 13.2% and a year-on-year increase of 41.7%, exceeding the consensus expectations of the securities market by about 5%.

TSMC’s core competitiveness comes from its continuous innovation and breakthroughs in advanced process technology and packaging. The company’s statement pointed out that “strong demand for our industry-leading 3nm and 5nm technologies in the smartphone and artificial intelligence fields provides solid support for our business.” TSMC has always been at the forefront of process technology and has taken the lead in mass production of smaller size processes including 5nm and 3nm, providing customers with chip solutions with excellent performance and lower power consumption. This not only gives it a strong competitive position in the high-end chip manufacturing market, but also lays a solid technical foundation for future performance growth. The successful research and development and mass production of 2nm process technology will further bring significant competitive advantages to the company.

According to financial report data, in the third quarter of 2024, the 3nm process began to contribute significantly to revenue, accounting for 20% of the total wafer sales in the quarter, which indicates that this cutting-edge technology has been successfully commercialized. At the same time, the 5nm process continues to maintain its market dominance, with sales accounting for as high as 32%. Although the market share of the 7nm process has decreased, it has remained stable at 17%. It is worth noting that the 7nm and below advanced process technologies contribute 69% of wafer sales revenue in total, which fully demonstrates TSMC’s technological innovation strength and market leadership in the semiconductor field.

In terms of business layout, AI chip foundry business continues to maintain strong growth momentum. At the same time, driven by the growth of iPhone shipments, the smartphone business has also achieved further recovery. Specifically, HPC (high performance computing) platform has become the area with the highest revenue share, reaching 51%, an increase of 11% compared with the same period last year; smartphone business accounts for 34%, an increase of 16% year-on-year; IoT business accounts for 7%, achieving a year-on-year increase of 35%; automotive business accounts for 5% of the market share. It is worth mentioning that DCE (digital consumer electronics business) is the only area that has declined this quarter, down 19% year-on-year.

Looking ahead, TSMC is expected to continue to benefit from orders for Apple’s new iPhone processors, and will also be positively affected by new processors launched by mobile chip manufacturers MediaTek and Qualcomm. In addition, TSMC is expected to achieve further revenue growth in the fourth quarter due to continued strong demand for AI accelerators. At the performance exchange meeting, TSMC management revealed that it expects sales in the fourth quarter to be between $26.1 billion and $26.9 billion, which is a 13% increase from the previous quarter and a 35% increase from the previous year if the middle value is taken. At the same time, the company expects gross profit margin in the fourth quarter to be in the range of 57% to 59%. In US dollar terms, TSMC expects sales to increase by nearly 30% this year.

In sharp contrast to TSMC’s strong performance, the performance of lithography machine giant ASML has suffered a “Waterloo”. In the third quarter financial report released on October 15, although ASML’s overall revenue exceeded market expectations, the amount of new orders in the quarter was only 2.6 billion euros, far below the market’s general estimate of 5.39 billion euros. The news caused ASML’s stock price to plummet by 16.26% that day, setting the largest single-day drop in nearly 26 years, and also affected the overall trend of the US chip sector. Industry sources said that ASML and TSMC’s senior executives are about to start bargaining negotiations on equipment procurement in 2025, and ASML hopes to increase the price by 3% to 5%.

In summary, TSMC’s outstanding performance in the third quarter further consolidated its leading position in the industry, indicating that its future growth potential is still broad. However, when reviewing the past and looking forward to the future, TSMC must face the evolving market environment and the increasingly fierce competition, continue to adapt to the needs of emerging markets, and strive to enhance its own endogenous growth momentum. Entering the upcoming fourth quarter, the market has high hopes for TSMC’s performance, and whether the company can continue to submit impressive financial reports will undoubtedly become a core issue that investors pay close attention to.