Key Points
- TSMC is expected to report a 30% rise in Q2 profit due to high demand for AI-related chips.
- TSMC plans substantial investments, potentially raising its capital spending beyond the current $28-$32 billion range.
- Significant investments in overseas factories, especially in Arizona and the USA, while keeping most of the production in Taiwan.
- TSMC remains a critical player in Taiwan’s economy, with competitors Intel and Samsung attempting to catch up.
Taiwan Semiconductor Manufacturing Co (TSMC), the leading producer of advanced chips for artificial intelligence (AI) applications, is projected to announce a 30% increase in second-quarter profits on Thursday, driven by escalating product demand. As the world’s largest contract chipmaker, TSMC counts tech giants Apple and Nvidia among its clientele and has seen its stock and the broader Taiwan market soar to record highs due to the AI surge. Recently, its American Depositary Receipts surpassed a trillion-dollar market value.
Analysts anticipate TSMC’s reporting a net profit of T$236.1 billion ($7.25 billion) for the quarter ending June 30, according to an LSEG SmartEstimate derived from 20 analysts. SmartEstimates prioritize the predictions of the most consistently accurate analysts. This forecast compares favorably to the T$181.8 billion net profit reported for the same period in 2023. Additionally, TSMC’s second-quarter revenue, announced last week, significantly exceeded market expectations.
“I expect the third-quarter outlook for all of their products to be very good,” remarked President Capital Management Co Chairman Li Fang-kuo. During its quarterly earnings call on Thursday at 0600 GMT, TSMC will provide updates on its current quarter and full-year outlook, including capital expenditure plans as it works to expand production capacity.
TSMC is investing billions in new factories overseas, with $65 billion allocated for three plants in Arizona, USA, although it maintains that most manufacturing will remain in Taiwan. In its previous earnings call in April, TSMC reiterated its capital spending guidance for the year, setting it between $28 billion and $32 billion, with 70% to 80% of this budget dedicated to advanced technologies.
“TSMC could raise their capital spending,” suggested KGI Securities Investment Advisory Co Chairman Chu Yen-min. “There are many positive factors which will help their stock price and support the broader market.” The ongoing AI boom has significantly boosted TSMC’s share prices, with its Taipei-listed stock soaring 75% this year to historic highs, compared to a 33% increase for the broader market.
TSMC, often referred to as the “sacred mountain protecting the country” for its pivotal role in Taiwan’s export-driven economy, faces minimal competition in its field. However, both Intel and Samsung strive to challenge TSMC’s dominance in the semiconductor market.
