Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chipmaker, announced on Thursday that its net profit for the third quarter soared 68.7% year-on-year to a record high. The stellar performance is underpinned by relentless global demand for artificial intelligence hardware, a trend that shows no signs of abating.
The company, which counts tech giants like Apple and Nvidia among its clients, reported net income of NT$325.3 billion (approximately €9.3 billion) for the July-September period. Revenue also climbed 39% to NT$759.7 billion, surpassing market expectations.
AI boom drives growth
TSMC's results underscore the central role it plays in the global semiconductor supply chain, particularly for advanced chips used in AI data centers. The company's CEO, C.C. Wei, highlighted that demand for AI accelerators remains "extremely strong," and he expects this momentum to continue into 2025.
"Our customers are seeing unprecedented interest in AI applications, from cloud computing to edge devices," Wei said during an earnings call. "We are working closely with them to expand capacity and meet their needs."
The company's advanced nodes, including its 3-nanometer and 5-nanometer processes, are operating at near-full capacity, reflecting the high demand for cutting-edge chips. TSMC is also ramping up production at its new facilities in Japan and Arizona, part of a broader strategy to diversify manufacturing beyond Taiwan.
European implications
For Europe, TSMC's performance is a reminder of the continent's dependence on Asian chipmakers. The European Union has been striving to boost its own semiconductor production under the European Chips Act, which aims to double the bloc's share of global chip output to 20% by 2030. However, the gap between European ambitions and Asian reality remains wide.
European companies, from automotive giants in Stuttgart to industrial firms in Lyon, rely heavily on TSMC for the chips that power everything from electric vehicles to factory automation. The ongoing AI boom is likely to intensify competition for these critical components, potentially straining supply chains that European manufacturers depend on.
In a related development, Dutch semiconductor equipment maker ASML recently posted record quarterly orders, but warned that supply will lag AI demand. This echoes TSMC's own capacity constraints and highlights the systemic challenges facing the industry.
Outlook and risks
Looking ahead, TSMC raised its revenue growth forecast for 2024, citing robust AI-related demand. The company now expects full-year revenue to grow by around 30%, up from its previous estimate of mid-to-high twenties percent.
However, risks remain. Geopolitical tensions across the Taiwan Strait continue to cast a shadow over the semiconductor industry. TSMC has long been considered a critical asset for Taiwan, and any disruption could have global repercussions. The company has taken steps to mitigate these risks by expanding its global footprint, including new plants in the United States and Japan.
For European policymakers, the message is clear: the continent must accelerate its efforts to build a resilient semiconductor ecosystem. The recent Dutch push for an EU kill switch on data sharing is one example of how member states are seeking to protect their interests in the digital age, but more needs to be done on the industrial front.
As the world becomes increasingly reliant on AI, the importance of companies like TSMC will only grow. Europe, with its ambitious Green Deal and digital transformation goals, cannot afford to be left behind in the race for chip supremacy.
