Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest and most crucial contract chipmaker, announced a staggering 60.7% jump in its second-quarter net profit on Thursday, a result that comfortably beat market forecasts and set a new historic high for the company.
This powerful performance was driven by the surging global demand for advanced semiconductors used in a wide array of artificial intelligence (AI) applications.
A banner quarter: record profits and revenue beat
TSMC, a key manufacturing partner for tech titans like Apple (AAPL.O) and Nvidia (NVDA.O), reported a net profit for the April-June period that rose to T398.3 billion (13.53 billion).
This figure handily surpassed the T$377.9 billion LSEG SmartEstimate, a consensus metric weighted toward forecasts from analysts who have a track record of being more consistently accurate.
According to Reuters, this second-quarter net profit also marked a new record high for the company. TSMC’s net revenue for the June quarter was equally impressive, rising 38.65% from a year ago to reach NT 933.80 billion (31.7 billion), also beating market estimates.
The AI megatrend: advanced chips drive growth
The driving force behind TSMC’s remarkable financial performance is the ongoing megatrend towards artificial intelligence.
As the world’s premier contract chip manufacturer, TSMC is uniquely positioned to benefit from this trend, as it is responsible for producing the most advanced AI processors for a roster of high-profile clients, including Nvidia and Apple.
In semiconductor technology, smaller nanometer sizes correspond to more compact and powerful transistor designs, which in turn lead to greater processing power and energy efficiency.
Underscoring this point, TSMC stated that these advanced chips, with sizes of 7-nanometers or smaller, accounted for a massive 74% of its total wafer revenue in the quarter.
Navigating headwinds: trade tensions and market uncertainties
Despite its current stellar performance, TSMC is not without potential challenges on the horizon. The company faces potential headwinds from the trade policy of US President Donald Trump, who has threatened to impose steep “reciprocal tariffs” on Taiwan.
According to local media reports, Taiwan is facing a 32% tariff announced in April and is currently in the midst of trade talks with the US Earlier this month, President Trump also warned of potential additional tariffs specifically on semiconductors, a move that would directly impact TSMC.
US export controls have also restricted TSMC’s business with China, as well as the business of its key clients like Nvidia and AMD.
However, amid a recent thawing of trade relations between Beijing and Washington, both Nvidia and AMD said earlier this week that they had received government assurances allowing them to resume shipping certain products to China, offering a glimmer of relief on that front.
Other potential headwinds facing TSMC in the second half of the year include the appreciation of the Taiwan dollar and the possibility of order cuts from smartphone and PC clients due to uncertain global macroeconomic conditions.
Despite these challenges, Taiwan-listed shares of TSMC have risen by about 5% so far this year, reflecting the market’s confidence in its long-term prospects.
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