Taiwan Semiconductor Q3 2024: $23.5B Revenue, 36% YoY Growth, and Record $10.06B Profit

TSMC reported impressive results for the third quarter! Their revenue hit NT$759.7 billion, which is the highest ever and shows a 39% increase compared to last year. Their net profit jumped to NT$325.3 billion, raising earnings per share to NT$12.54, a 54.2% increase. The gross margin was an excellent 57.8%, higher than the expected range of 53.5%-55.5%, and the operating margin reached 47.5%, exceeding the guidance of 42.5%-44.5%.

Taiwan Semiconductor Q3 2024 Earnings Summary

Revenue: $23.5 billion (estimated $23.3 billion); up 36% from last year

Gross Margin: 57.8% (estimated 55%); up from 54.3% last year

Operating Margin: 47.5% (estimated 44%)

Net Profit: NT$325.26 billion ($10.06 billion); the highest ever

Q4 2024 Guidance:

Revenue: Expected between $26.1 billion and $26.9 billion (estimated $24.94 billion)

Gross Margin: Expected between 57% and 59% (estimated 54.7%)

Operating Margin: Expected between 46.5% and 48.5% (estimated 44.3%)

Full Year 2024 Outlook:

Revenue Growth: Close to 30% (up from mid-20%)

Capital Expenditure: Slightly over $30 billion (estimated $30-32 billion)

AI Processor Revenue: Expected to triple, making up a mid-teens percentage of total revenue

Segments:

Wafer Shipments: 3.338 million units; up 15% from last year

Average Selling Price per Wafer: $6,131; up 18% from last year

Advanced Technologies (7nm and smaller): 69% of wafer revenue

3nm: 20% of revenue (up from 15% in Q2)

5nm: 32% of revenue (down from 35% in Q2)

7nm: 17% of revenue (unchanged from Q2)

Product Revenue:

High-Performance Computing: 51% of total revenue

Smartphones: 34% of total revenue

Combined (HPC + Smartphones): 85% of total revenue

IOT: 7%

Automotive: 5%

Data Center: 1%

Others: 2%

Revenue by Region:

North America: 71%

China: 11%

Asia Pacific: 10%

Japan: 5%

EMEA: 3%

Operational Highlights:

3nm Technology: 20% of total wafer revenue, performing better than the previous 5nm ramp-up by 30%

Utilization Rates: Increasing due to strong demand for AI

Capital Expenditure: $6.4 billion in Q3; 2025 capital spending expected to be higher than 2024

Expansion Plans:

Arizona Factories: Production expected to start in 2025

Japan Factories: First factory will start production this quarter; second will be operational by 2027

Europe Factory: Production expected by 2027

CEO C.C. Wei’s Comments:

The demand for semiconductors is very high and is just beginning.

They are seeing strong AI-related demand, which is increasing capacity utilization for their 3nm and 5nm technologies.

High gross margins are crucial for sustainable growth in their capital-intensive business.

They expect healthy growth next year and higher spending in 2025.

AI revenue growth is likely to boost long-term growth, but no specific numbers were provided.

Additional Insights:

Intel remains an important customer with significant contributions.

Demand for advanced packaging (CoWoS) is greater than supply, with plans to double capacity by 2025.

Non-wafer revenue now makes up over 10% of total revenue.

Challenges Affecting Gross Margin:

New overseas factories may reduce margins by 2-3% each year.

The ramp-up of 3nm technology could cause a 3-4% reduction.

Converting from 5nm to 3nm will reduce margins by 1-2%.

Inflation, exchange rate changes, and rising electricity costs are also expected to impact gross margins in the coming years.