Taiwan Semiconductor Manufacturing Company (TSMC), the world’s leading chipmaker, has reported an unexpectedly strong financial performance for the third quarter of 2024. TSMC's revenues soared to $23.5 billion, marking a significant 36% increase year-over-year. The company’s net profit surged even more dramatically, climbing by 51% to exceed $10 billion.

Major Drivers of Growth

A key driver of this impressive revenue growth is the increasing demand for TSMC's 3-nanometer chips. This demand is primarily fueled by the introduction of TSMC's second-generation 3-nm process, known as N3E, which has helped overcome the lower yields associated with the initial N3B generation. Currently, 3-nm chips account for 20% of TSMC's production, with Apple being the largest customer for their use in iPhones, MacBooks, and Macs.

Intel has also joined the ranks of 3-nm chip buyers, acquiring these from TSMC for its Core Ultra 200 Lunar Lake and Arrow Lake processors, albeit still using the older N3B process. Furthermore, cutting-edge 3-nm mobile processors from Qualcomm and Mediatek are set to hit the market soon.

Capitalizing on AI and Advanced Processes

TSMC continues to maintain a strong position in the 5-nm-class chip market, which includes processes marketed as 4 nm, such as N4, N4P, and N4X. Nvidia stands out as TSMC’s largest customer in this sector, utilizing these processes in their AI accelerators and GeForce GPUs.

TSMC categorizes all processes starting from the 7-nm generation as advanced. These advanced fabrication nodes constitute a significant 69% share of TSMC's entire chip manufacturing revenue.

Financial Highlights and Strategic Investments

TSMC has increased its gross margin from 53.2% to 57.8% within three months, partly due to alleged price hikes. The company typically does not disclose wafer pricing, but speculation and market trends suggest significant pricing adjustments.

The breakdown of TSMC's revenue streams highlights why the company shows limited interest in automotive manufacturers, as they contribute merely 5% to its overall sales. Instead, the focus remains on advanced technologies and processes that yield higher profits.

Expanding Packaging Capabilities

Approximately 15% of TSMC's revenue, around $3.8 billion, is derived from packaging solutions. Advanced packaging, particularly chiplet integration, is especially profitable. To meet the demand for Nvidia's AI accelerators, TSMC is ramping up its packaging capacity.

Future Outlook

Looking ahead to the fourth quarter, TSMC forecasts revenues between $26.1 billion and $26.9 billion. This optimistic outlook has been received positively by the markets, with TSMC's stock appreciating by close to 9% following the announcement.

This update was initially reported by heise online.