TSMC raises hopes of a prolonged AI boom

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Taiwan Semiconductor Manufacturing Company said red-hot AI demand is boosting growth and causing capacity bottlenecks well beyond next year, raising hopes of a prolonged AI boom even as the industry is hit by fears about new export controls.

The world’s largest chipmaker on Thursday raised its full-year forecast to slightly over 25 per cent revenue growth in US dollar terms from its previous guidance of 20-25 per cent.

TSMC reported a 36 per cent jump in net profit to NT$247.8bn (US$7.6bn) and a 40 per cent increase in revenue to NT$673.5bn for the second quarter compared with the same period last year, outperforming the guidance it gave three months ago.

The bullish outlook followed a two-day slide in technology shares after US presidential candidate Donald Trump took a hostile stance towards Taiwan and its chip industry. In a Bloomberg interview published on Tuesday, Trump said that Taiwan should pay for US defence support and claimed its companies “stole” the US’s semiconductor business.

The tech-heavy Nasdaq Composite index fell 2.8 per cent in New York on Wednesday, marking its worst day since December 2022. The S&P 500 index was 1.4 per cent lower, ending a three-session winning streak.

TSMC shares closed 2.4 per cent lower in Taipei on Thursday, dragging down the Taiex benchmark index by 1 per cent.

The chipmaker’s management shook off questions about potential risks from US policy. “We have not changed any of our original plans regarding the expansion of overseas fabs,” said CC Wei, chair and chief executive officer.

The company has committed to investing US$65bn in Arizona to build three fabrication plants and bring its most advanced process technology to the US in 2028.

TSMC, which accounts for more than 90 per cent of the world’s most advanced chip production, manufactures semiconductors according to designs of other companies such as AI chip leader Nvidia.

“We expect our business to be supported by strong AI and smartphone demand for our leading edge technology,” Wei said. TSMC also lifted its capital expenditure budget to between US$30bn and US$32bn, the higher end of its earlier forecast, citing efforts to meet strong AI demand.

TSMC’s AI customers want to move into N2, a process technology scheduled to go into mass production in the second half of 2025, and A16, which is even further away, said Wei, adding: “We are working to build enough capacity to support that but it’s very tight.”

He added that a shortage in TSMC’s capacity for CoWos, its advanced packaging technology, is unlikely to be resolved by the end of this year despite the company more than doubling its capacity this year.

Having previously said it hoped to reach a balance between supply and demand in advanced packaging by the end of this year, TSMC management said it would not be able to achieve that. “I hope sometime in 2025 or 2026,” Wei said.