The Taiwan Semiconductor Manufacturing Company (TSMC) has reported impressive financial results for the fourth quarter, showcasing a significant increase in both revenue and profit. The surge in demand for advanced chips, particularly those utilized in artificial intelligence (AI) applications, has played a pivotal role in these results, exceeding market expectations and marking a record-setting year for the company.
Fourth-Quarter Financial Performance
In the fourth quarter, TSMC's net revenue reached 868.46 billion New Taiwan dollars (approximately $26.36 billion), surpassing analysts' predictions of 850.08 billion New Taiwan dollars. The company's net income also exceeded expectations, amounting to 374.68 billion New Taiwan dollars, compared to the anticipated 366.61 billion New Taiwan dollars. This performance reflects a remarkable 57% increase in profit year-over-year and a 38.8% rise in revenue. TSMC had initially forecasted its revenue for the quarter to fall between $26.1 billion and $26.9 billion, indicating strong demand dynamics.
Drivers of Growth
The growth in TSMC's high-performance computing (HPC) division, which includes AI and 5G applications, was particularly notable, contributing 53% of the company’s revenue in the fourth quarter. This segment saw a 19% increase in revenue from the previous quarter, driven by robust demand for AI chips, which has surpassed earlier expectations. According to Brady Wang, an associate director at Counterpoint Research, this demand was further supported by the advanced chips used in Apple's latest iPhone 16 model.
Record Annual Performance
TSMC's total revenue for the year reached a historic high of NT$2.9 trillion, marking the highest sales since the company went public in 1994. C.C. Wei, TSMC's Chairman and CEO, expressed optimism about the ongoing demand for AI-related products, noting that revenue from AI accelerator products is expected to account for a significant portion of total revenue in 2024. Wei projected that even after a substantial increase in 2024, revenue from AI accelerators is anticipated to double in 2025, driven by the continuous growth in AI applications.
Potential Challenges Ahead
Despite the positive outlook, TSMC may encounter challenges in 2025, particularly due to U.S. restrictions on advanced semiconductor shipments to China and uncertainties regarding the trade policies of President-elect Donald Trump. Wei indicated that TSMC would adopt a low-profile approach and would not participate in Trump’s inauguration, as the company navigates potential geopolitical tensions that could impact its operations.
Market Reactions
Following the announcement of its fourth-quarter results, TSMC's shares on the Taiwan stock exchange rose by 81% in 2024, with a further increase of 3.75% on the day of the earnings release. Additionally, European semiconductor stocks also experienced gains, with notable increases in companies such as ASML and ASM International, reflecting a broader positive sentiment in the semiconductor market.
Conclusion
TSMC's fourth-quarter results highlight the company's pivotal role in the semiconductor industry, particularly in the context of the growing demand for AI technologies. As TSMC continues to capitalize on this trend, it faces both opportunities and challenges that will shape its future performance. The anticipated growth in AI-related revenue suggests a sustained demand for advanced semiconductor capabilities, while external factors like trade policies remain a critical area to monitor in the coming years.