Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chipmaker, reported stronger-than-expected profits and revenue in the fourth quarter of 2023. Despite weaker macroeconomic conditions, TSMC's performance underscores the company's robust position in the semiconductor industry.
For the quarter ending January 13, TSMC reported a revenue of 625.53 billion New Taiwan dollars ($19.62 billion), surpassing the LSEG consensus estimates of NT$618.31 billion. The company's net income also exceeded expectations, coming in at NT$238.71 billion, against the forecast of NT$225.22 billion. This represents a 1.5% year-on-year decline in revenue, while net income dropped 19.3% from the previous year.
TSMC's fourth-quarter results were buoyed by the rapid adoption of its industry-leading 3-nanometer technology. "In the fourth quarter, revenue increased 14.4% sequentially, supported by the continued strong ramp of our industry-leading 3-nanometer technology," TSMC stated in its earnings report. The company's client roster includes tech giants like Apple and Nvidia, with TSMC producing the advanced processors found in Apple's iPhones.
Amidst a challenging year for the global semiconductor industry, marked by macroeconomic conditions and an inventory adjustment cycle, TSMC's resilience stands out. The company's CEO, C.C. Wei, acknowledged the tough environment but remained optimistic about the firm's growth prospects, particularly in the field of high-performance computing and generative AI applications. "We expect 2024 to be a healthy growth year for TSMC, supported by continuous strong ramp-up of our industry-leading three nanometer technologies, strong demand for the five nanometer technologies and robust AI-related demand," Wei commented.
Looking ahead, TSMC forecasts first-quarter revenue for 2024 to be between $18 billion and $18.8 billion, signaling a confident outlook despite macroeconomic uncertainties. The company's progress in advanced chip manufacturing, especially in 3-nanometer chips, and plans to start 2-nanometer mass production by 2025, positions TSMC at the forefront of the semiconductor industry.
TSMC's capital expenditure is also stabilizing following significant investments in expanding its state-of-the-art facilities in Taiwan and establishing fabrication plants in the U.S. and Japan. "The rate of increase of our capital spending has begun to level off as we start to harvest growth," said Wendell Huang, TSMC's chief financial officer, indicating a strategic shift from expansion to consolidation.
Despite the competitive pressures from rivals like Intel and Samsung, TSMC's management remains confident in maintaining its lead in the industry. TSMC chair Mark Liu emphasized the company's distinct approach compared to Intel's integrated device manufacturer (IDM) model, stating, "IDM typically only optimizes their technology for their own product, while foundry optimizes for their customers."
TSMC's robust performance in a challenging global market highlights its critical role in the semiconductor supply chain and its ability to navigate economic uncertainties. As the company gears up for another year of growth, its strategic focus on advanced technologies and customer-centric approach will be key to sustaining its leadership in the ever-evolving semiconductor industry.
