Taiwan Semiconductor Manufacturing Co. (TSMC) reported a 16.1% increase in Q3 net profit from Q2, reaching TWD 211.00 billion ($6.55 billion) on Thursday. The company's earnings per share rose to TWD 8.14 from TWD 7.01 in Q2, exceeding Wall Street estimates of $1.16 per share. TSMC's gross margin also surpassed their mid-July prediction, achieving 54.3% instead of the anticipated 51.5%-53.5%.
The profit growth and higher gross margin are attributed to the depreciation of the Taiwan dollar against the U.S. dollar, spurred by the Federal Reserve's aggressive rate hike, and an increased demand for high-performance computing devices, smartphones, and IoT applications.
Despite a year-on-year net profit drop of 24.9% and a 10.8% decline in consolidated sales due to a global demand slowdown amid a slower world economy, TSMC reported Q3 consolidated sales of $17.28 billion, aligning with their earlier forecast of $16.7 billion-$17.5 billion.
The company's stock rose roughly 3% premarket following these Q3 results and a Q4 outlook that surpassed expectations. For the upcoming quarter, TSMC projects its revenues to be in the range of $18.8 billion to $19.6 billion, above the consensus estimate of $18.33 billion.
CEO C.C. Wei unveiled plans for a specialty plant in Dresden, Germany, specifically targeting automotive and industrial applications and likely focusing on 22, 28, and 16nm technology. Construction is expected to commence in H2 2024, with production starting in late 2027.
Significant progress was reported for operations in Arizona and Japan. In Arizona, improvements were noted in utilities and equipment installation, with approximately 1100 employees hired. However, the start of production at the Arizona plant has been delayed to 2025 due to a lack of skilled workers. In Japan, where 800 employees have been hired, production remains on schedule for late 2024.
In China, despite new U.S. export controls affecting Nvidia (NASDAQ:NVDA) chips and a $100,000 spending cap on investments in advanced capacity, TSMC has received an extension from the U.S. Bureau of Industry and Security to continue operations. The company is also applying for permanent authorization.
In Q3, TSMC's advanced 3nm process technology contributed to 6% of total wafer revenue while 5nm and 7nm accounted for 37% and 16% respectively. North America remained the largest market contributing to 69% of total net revenue, while China represented 12%. High Performance Computing and Smartphone platforms represented 42% of net revenue, with Smartphone contributing 39%.
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