Revenue at TSMC increases by 26% due to investment in Artificial Intelligence
TSMC's AI-Driven Growth Reshapes Semiconductor Market
Taiwan Semiconductor Manufacturing Co (TSMC) has reported a significant surge in sales, with a 26% month-on-month growth and a total of NT$323.2 billion (US$10.83 billion) last month. This growth is part of a larger trend, as TSMC is experiencing a 38% growth this year compared to its performance from January to July 2020.
The report, from Bloomberg, adds to evidence of accelerating spending on artificial intelligence (AI). TSMC's strong performance is particularly noteworthy in the AI sector, where it is the go-to chipmaker for major players such as Nvidia Corp and Advanced Micro Devices Inc.
TSMC's growth is in line with analyst expectations of a 25% increase in the company's third-quarter revenue. This growth is driven by the demand for AI and high-performance computing (HPC) chips, which account for about 60% of TSMC's sales.
The company's advanced chip manufacturing technologies, including 2nm nodes and 3D packaging, give it a significant edge in the market. TSMC's CoWoS (Chip-on-Wafer-on-Substrate) packaging technology is a cornerstone for next-generation AI accelerators, tripling capacity to 90,000 wafers per month by 2026.
To mitigate risks from US-China trade tensions and tariffs, TSMC is actively expanding US-based manufacturing capacity. The administration of US President Donald Trump announced new tariffs on chips, but TSMC is exempt due to its investment in US production. This expansion receives support from $5 billion in subsidies and 35% tax credits, aligning TSMC’s strategy with US semiconductor security goals while securing domestic AI chip supply.
TSMC's growth puts pressure on US-based rivals such as Intel, who are striving to catch up technologically and scale-wise. TSMC's dominance in the AI chip foundry market, with a 90% share, leaves US manufacturers like GlobalFoundries Inc and Amkor Technology Inc at risk of losing market share.
TSMC embeds AI within its manufacturing processes to improve yields and reduce defects, coining the term "Foundry 2.0" for this AI-driven value chain. This innovation further strengthens its competitiveness against US companies, which face challenges matching TSMC’s scale and technological integration.
The increasing interest in "sovereign AI" and government-backed initiatives to localize AI technology stacks encourage TSMC to balance global dominance with localized US operations. This dynamic complicates the semiconductor tariff landscape and may drive further investments on both sides, but currently leaves TSMC in a strong competitive position.
Meanwhile, the smartphone sector is on a gradual recovery this year, according to Sony Group Corp. Apple Inc reported its fastest quarterly revenue growth in more than three years on solid demand in China. Apple Inc expects its sales in the current quarter to grow a mid-to-high-single-digit percentage year-on-year. TSMC still has significant business providing semiconductors for smartphones, making it a crucial player in the broader electronics market.
In summary, TSMC's AI-focused growth enhances its global semiconductor market leadership, driven by cutting-edge manufacturing, strategic US expansion to offset tariff and geopolitical risks, and dominant customer partnerships. This places significant pressure on US-based rivals who are striving to catch up technologically and scale-wise, even as subsidies and tariffs shape the playing field.
The significant growth experienced by TSMC, with a focus on artificial intelligence (AI), indicates a expanding trend in spending within this sector. TSMC's advancements in AI-driven manufacturing technologies, such as Foundry 2.0, further strengthens its lead in the global AI chip foundry market.
