Taiwan Semiconductor Manufacturing Company (TSMC) announced that strong demand for AI technology is driving growth and causing capacity constraints well into the next year. This raises hopes for a sustained AI boom, even as the industry is affected by concerns over new export controls.
The world's largest chip manufacturer raised its annual forecast on Thursday to just over 25 percent revenue growth in US dollars, up from a previous forecast of 20 to 25 percent.
TSMC reported a 36% increase in net profit to NT$247.8 billion (US$7.6 billion) and a 40% rise in revenue to NT$673.5 billion for the second quarter compared to the same period last year, surpassing the forecast given three months ago.
The optimistic forecast followed a two-day decline in technology stocks after US presidential candidate Donald Trump took a hostile stance toward Taiwan and its chip industry. In an interview published by Bloomberg on Tuesday, Trump said that Taiwan should pay for US defense support and claimed that its companies had "stolen" the US semiconductor business.
The technology-oriented Nasdaq Composite Index fell by 2.8 percent in New York on Wednesday, marking its worst day since December 2022. The S&P 500 Index was down 1.4 percent, ending a three-day winning streak.
TSMC shares closed 2.4 percent lower in Taipei on Thursday, dragging the Taiex benchmark index down by 1 percent.
The management of the chip manufacturer brushed off questions about potential risks from US policies. "We haven't changed any of our original plans regarding the expansion of overseas factories," said CC Wei, chairman and CEO of TSMC.
The company has committed to investing $65 billion in Arizona to build three manufacturing plants and bring its most advanced process technology to the USA by 2028.
TSMC, responsible for more than 90 percent of the world's most advanced chip production, manufactures semiconductors based on the designs of other companies like AI chip leader Nvidia.
We expect our business to be supported by strong AI and smartphone demand for our leading technology," said Wei. TSMC also raised its capital expenditure budget to between US$30 billion and US$32 billion, the upper end of the previous forecast, citing efforts to meet strong AI demand.
TSMC's AI customers want to adopt N2, a process technology that is expected to go into mass production in the second half of 2025, and A16, which is even further away, said Wei, adding: "We are working on creating enough capacity to support this, but it is very tight.
He added that a bottleneck in TSMC's capacity for CoWoS, its advanced packaging technology, is unlikely to be resolved by the end of this year despite the company's more than doubled capacity this year.
After the company previously stated that it hoped to achieve a balance between supply and demand for advanced packaging by the end of this year, TSMC management said this would not be possible. "I hope sometime in 2025 or 2026," said Wei.
