A significant announcement has emerged from TSMC, the world’s leading semiconductor manufacturer.
According to reports, TSMC has commenced the mass production of advanced 4-nanometer chips at its facility in Arizona, USAThis marks the first instance of TSMC engaging in the large-scale production of advanced chips on American soilGina Raimondo, the U.SSecretary of Commerce, remarked, “This is a significant breakthrough, unprecedentedMany believed this was an impossible feat.”
TSMC serves an essential role as a supplier for major corporations, including Apple and Nvidia, positioning itself as a key benefactor of the current global boom in artificial intelligenceThe company’s stock has seen approximately a 90% increase in 2024, and its market capitalization has surpassed $1 trillion for the first timeRecent disclosures from TSMC indicate that its revenue in December 2024 increased by 57.8% compared to the previous year and grew by 0.8% month-over-monthAdditionally, the company reported a 38.8% revenue growth year-over-year for the fourth quarter of 2024, exceeding market expectations and boosting investor optimism about the continuation of the AI boom into 2025.
Production of 4-Nanometer Chips in the U.S.
On January 10, U.SSecretary of Commerce Gina Raimondo announced that TSMC has begun production of 4-nanometer chips for American customers in Arizona.
In an interview, Raimondo stated, “This is the first time in U.S. history that leading 4-nanometer chips have been produced domestically by American workers.” She further noted that production of these advanced chips began in recent weeks. “This is a significant breakthrough, unprecedented
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Many believed this was an impossible feat,” she reiterated.
Reports suggest that to revitalize its semiconductor industry, the U.S. government passed a $52.7 billion subsidy plan in 2022 to encourage leading semiconductor firms, including TSMC, to establish fabrication plants in America.
Currently, TSMC operates two fabrication plants in ArizonaIn April 2024, the company agreed to increase its investment by $25 billion to a total of $65 billion, with plans to establish a third fabrication plant in the state by 2030.
In November of last year, the U.SDepartment of Commerce approved $6.6 billion in grants for TSMC’s U.S. subsidiary for factory construction, and the company also secured interest-free loans of up to $5 billion.
TSMC previously projected that its first facility in Arizona would begin mass production in the first half of 2025, with the second plant expected to manufacture the most advanced 2-nanometer chips by 2028. Moreover, TSMC confirmed it would utilize cutting-edge A16 chip manufacturing technology at its Arizona facilities.
As the world’s largest semiconductor foundry, TSMC is the primary supplier for technology giants such as Apple and NvidiaAccording to forecasts from the U.SDepartment of Commerce, by 2030, the U.S. is expected to produce approximately 20% of the world’s advanced chips, an impressive shift given that the country had nearly zero production capacity for advanced chips until recently.
Surge in TSMC Revenue
On January 10, TSMC released its revenue report for December 2024. The data revealed that TSMC's revenue for December reached 278.163 billion New Taiwan Dollars, reflecting a 0.8% increase from the previous month and a remarkable 57.8% rise compared to the same month last year
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The total revenue for TSMC in 2024 is estimated to be around 2.8943 trillion New Taiwan Dollars, an increase of 33.9% from 2023.
According to estimates, the total revenue for the fourth quarter of 2024 (October to December) amounted to 868.5 billion New Taiwan Dollars (approximately $26.36 billion), surpassing market predictionsAnalysts had generally expected the company’s fourth-quarter revenue to be around 853.6 billion New Taiwan Dollars (approximately $25.9 billion).
The robust performance of TSMC is fueling expectations that major tech companies, such as Google, Microsoft, and Amazon, will continue to quickly build and upgrade data centers to drive artificial intelligence developmentThis month, Foxconn, a manufacturer of AI servers, reported sales that exceeded expectations, while Microsoft detailed plans to invest $80 billion in data centers for the current fiscal year.
As the leading advanced chip manufacturer globally, TSMC has emerged as one of the biggest beneficiaries in the race for AI developmentIn 2024, TSMC's market value nearly doubled, now nearing $1.1 trillion in the U.S. stock market.
However, concerns linger in the marketplaceIssues such as overproduction and power shortages could become bottlenecks for AI developmentFurthermore, the lack of killer AI applications may lead to underutilized server capacitiesBeyond challenges posed by Nvidia and the AI sector, TSMC also faces uncertainty in the global technology market and geopolitical landscapes
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Nevertheless, TSMC's gross margin is expected to reach new heights.
Morgan Stanley predicts that TSMC may experience a 5% revenue decline in the first quarter due to seasonal impacts linked to iPhone salesNonetheless, the company is still anticipated to see revenue growth for the entire year, albeit at a rate potentially below 20%. Analyst Charlie Chan noted that TSMC typically adopts a conservative approach to its performance guidance.
TSMC is set to release its detailed earnings report for the fourth quarter on January 16, at which time it will update its forecasts for the quarter and the entire yearIndustry analyst Charles Shum mentioned, “TSMC’s gross margin could soar to its highest level in two years at 58%, or even higherThere are four key areas of focus for the upcoming earnings call: first, the progress and revenue of the CoWoS advanced packaging capacity, which may provide insight into TSMC’s expectations for AI chip demand over the next 12 to 18 months; second, enhancing production at the Arizona facility, which is crucial for meeting U.S. customers’ chip demands including those from Apple and Nvidia; third, the potential profit pressure stemming from a decreased demand for mature process nodes such as 7nm and 16nm; and finally, the 2025 capital expenditure plan, which will showcase TSMC’s confidence in the adoption of the next generation 2nm process.
Recently, Citi analysts indicated that driven by Nvidia, TSMC’s revenue related to AI could see substantial growth by 2025, with Nvidia potentially surpassing Apple to become TSMC’s largest client, doubling its revenue contribution to 20%.
Citi analysts further noted that besides Nvidia, the demand for application-specific integrated circuits (ASICs) designed specifically for AI is poised for strong growth over the next two to three years, bolstering TSMC’s performance
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