On July 18, TSMC announced its financial report for the second quarter of 2024, with core financial indicators showing double-digit growth both year-on-year and quarter-on-quarter.
In the second quarter, TSMC achieved revenue of NT$673.51 billion, a year-on-year increase of 40.1% and a quarter-on-quarter increase of 13.6%, surpassing market expectations of NT$658.14 billion;
Net profit was NT$247.8 billion, up 36.3% year-on-year and 9.9% quarter-on-quarter, exceeding market expectations of NT$235 billion;
Operating profit reached NT$286.56 billion, a year-on-year increase of 41.9% and a quarter-on-quarter increase of 15.1%, surpassing market expectations of NT$274 billion.
Additionally, the gross profit margin for the second quarter was 53.2%, higher than the market expectation of 52.6%; operating profit margin was 42.5%, and net profit margin was 36.8%.
<img src="https://imageproxy.pbkrs.com/http://img.jrjimg.cn/2024/07/cms_20240718170106679.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/http://img.jrjimg.cn/2024/07/cms_20240718170106679.jpg"/>
Both actual revenue and actual gross profit margin, operating profit margin have exceeded the upper limit of TSMC's previous forecast range.
During the April earnings call, TSMC forecasted its second-quarter USD revenue to be between $19.6 billion and $20.4 billion. Calculated at an exchange rate of 1 USD to 32.3 NTD, this translates to revenue of approximately NT$633 billion to NT$658.92 billion; the estimated gross profit margin for the second quarter was 51%-53%, and the operating profit margin was 40%-42%.
TSMC's US stock market maker saw a short-term rally in after-hours trading, with the pre-market increase expanding to 3.86% at the time of writing.
▌3nm Process Shows High Growth Potential
Advanced process products remain the revenue backbone. In the second quarter, TSMC's advanced process (7nm and below) accounted for 67% of wafer revenue, an increase of 2 percentage points from the previous quarter (65%). TSMC stated that 3nm process products contributed to performance, accounting for 15% of wafer revenue this quarter; 5nm and 7nm accounted for 35% and 17%, respectively.
Benefiting from the introduction of 3nm technology in Apple's iPhones, this part of TSMC's business officially started in the third quarter of last year.
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<img src="https://imageproxy.pbkrs.com/http://img.jrjimg.cn/2024/07/cms_20240718170107078.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" original-src="https://imageproxy.pbkrs.com/http://img.jrjimg.cn/2024/07/cms_20240718170107078.jpg"/>
It can be seen that in the second quarter of this year, among all product lines, revenue growth of the 3nm process was the highest, achieving a doubling quarter-on-quarter growth.
Currently, the main application scenario for the 3nm process is high-end smartphones. With more high-performance computing (HPC) customers such as Qualcomm and MediaTek adopting 3nm technology in 2024, its growth is expected to continue
▌Mobile and AI-related products are expected to continue driving demand for advanced processes
Currently, HPC (High-Performance Computing) has firmly replaced the mobile business, becoming the core of TSMC's performance. In the second quarter, this business saw a significant increase in revenue by 28% compared to the previous quarter, followed closely by the DCE business, which includes Digital Consumer Electronics such as T-Con, PMIC, WiFi chips, targeting applications like set-top boxes and smart TVs, with a revenue growth of 20% compared to the previous quarter.
<img src="https://imageproxy.pbkrs.com/http://img.jrjimg.cn/2024/07/cms_20240718170107473.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/http://img.jrjimg.cn/2024/07/cms_20240718170107473.jpg"/>
Image Source: TSMC Financial Report
<img src="https://imageproxy.pbkrs.com/http://img.jrjimg.cn/2024/07/cms_20240718170107648.jpg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/http://img.jrjimg.cn/2024/07/cms_20240718170107648.jpg"/>
Image Source: TSMC Financial Report
The above graphs clearly show the growth of TSMC's various businesses.
It is worth noting that the market generally believes that TSMC's AI business is included in these two businesses (HPC and DCE).
Research firm Counterpoint previously estimated that in 2023, TSMC's AI chip revenue accounted for approximately 13% of its HPC revenue, and is expected to reach around 15.4% in 2024. Counterpoint has suggested that AI-enabled smart devices mentioned in DCE may be related to this part of the AI business.
Furthermore, in the second quarter, the mobile market, which accounts for 33% of the performance, still shows no significant signs of recovery, with a revenue decline of 1% compared to the previous quarter, being the only part of the business that declined, significantly dragging down performance.
TSMC's Senior Vice President and Chief Financial Officer, Wendell Huang, stated: &#34;In the second quarter, the strong growth of our business was driven by robust demand for 3nm and 5nm technologies, but the continued seasonal factors in mobile partially offset this growth. Entering the third quarter of 2024, it is expected that the strong demand for advanced process products from mobile and AI-related products will support performance.&#34;
▌Raising Capital Expenditure Again, Expansion Focus on 3nm/2nm Processes, COWOS Packaging
TSMC has provided positive performance outlook and a capital expenditure plan that exceeds market expectations—
TSMC Chairman and CEO C.C. Wei stated that TSMC's 2024 sales growth guidance in US dollars has been raised to above the mid-20% range; expected third-quarter sales of $22.4 billion to $23.2 billion; gross margin of 53.5% to 55.5%, with market estimates at 52.5%; operating margin between 42.5% and 44.5%
Capital expenditures for the full year of 2024 are expected to be between USD 30 billion and USD 32 billion. The previous capital expenditure guidance was USD 28 billion to USD 32 billion, with the market estimating USD 29.55 billion.
More resources will continue to be allocated to high-demand advanced process capacity and AI products.
TSMC stated that demand for the 3nm process is very strong, and more 5nm processes may be converted to 3nm. The construction of the N2 factory (2nm process chip production line) is progressing smoothly, with N2 process planned for mass production in 2025.
In 2025, COWOS packaging capacity will double compared to 2024, and COWOS packaging capacity will remain tight in 2025.
According to DIGITIMES, industry insiders revealed that in the second half of this year, TSMC's 3nm chip monthly output will increase from the current 100,000 pieces to 125,000 pieces to meet the demand of major customers such as Apple, Intel, Qualcomm, and MediaTek.
According to sources from semiconductor equipment companies, TSMC's 5nm and 3nm process capacities are already fully loaded, especially the 3nm capacity is in short supply. TSMC's current 5/3nm process capacity utilization rate has reached 100%, with the fastest mass production of 2nm expected in the fourth quarter of 2025, with a target monthly capacity of 30,000 pieces. With the future volume production in the Kaohsiung plant, the combined monthly capacity of Hsinchu and Kaohsiung is expected to reach 120,000 to 130,000 pieces

Taiwan Semiconductor announced its second-quarter financial report for 2024, achieving double-digit growth in revenue and profit, exceeding market expectations. Revenue mainly comes from advanced process products, with the 3nm process showing the largest revenue increase and expected to continue growing. The demand for mobile phones and AI-related products will also drive the demand for advanced processes. Taiwan Semiconductor's stock price has also risen. Taiwan Semiconductor plans to increase capital expenditures, focusing on expanding production capacity for advanced processes

- TSMC released its Q2 2024 financial report on July 18, showing a significant increase in key financial indicators. Revenue reached NT$673.51 billion, up 40.1% YoY and 13.6% QoQ, surpassing market estimates; net profit was NT$247.8 billion, up 36.3% YoY and 9.9% QoQ, exceeding market expectations; operating profit was NT$286.56 billion, up 41.9% YoY and 15.1% QoQ, also surpassing estimates.
- The 3nm process demonstrated substantial growth, contributing significantly to TSMC's performance. HPC has replaced smartphones as a core revenue driver, with a 28% QoQ increase. TSMC anticipates strong demand for advanced processes from mobile and AI-related products in Q3 2024.
- TSMC plans to increase capital expenditure, focusing on 3nm/2nm processes and COWOS packaging. The company raised its 2024 sales growth guidance above 20%, with a capital expenditure of $300-320 billion for the year. Demand for 3nm remains robust, with plans to potentially convert more 5nm capacity to 3nm.

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Taiwan Semiconductor

Taiwan Semiconductor Q2 financial report exceeds expectations in all aspects, will focus on expanding production of advanced processes, and raise full-year capital expenditure