Growth again for chip maker TSMC after three quarters of decline

This article was last updated on October 19, 2023

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TSMC sees a turnaround in growth

After experiencing three consecutive quarters of decline in turnover, Taiwanese chipmaker TSMC is finally showing growth once again. Although income is still lower compared to the same period last year, the company’s current quarter is looking more promising. TSMC’s turnover for the last quarter reached $17.2 billion (€16.3 billion). The company attributes this growth to the high demand for computer chips used in AI (artificial intelligence) development.

High demand for AI chips

TSMC’s CEO, C.C. Wei, stated in an analyst conversation that the demand for chips is currently surpassing the company’s production capacity. The shortage of GPUs (graphics processing units) used for heavy AI tasks has been an ongoing issue. However, while the demand for AI chips is significant, it is not enough to compensate for the loss of demand in other areas of the market. Wei referred to these customers as “prudent” and expects them to carefully manage their inventories throughout the last quarter of the year.

Purveyor to the Royal Household

TSMC’s financial results announcement closely follows that of chip machine maker ASML, which has a strong partnership with TSMC. ASML supplies the machines necessary for TSMC to manufacture advanced chips. TSMC is currently the world’s largest independent chip manufacturer.

In comparison, ASML reported a 70% decrease in orders compared to the previous year. However, its turnover remained higher than that of the same period last year.

Challenges in the chip sector

The overall chip sector is currently facing challenges. ASML believes that the tipping point will come in the next year, with 2024 being a “transition year”. Based on signals from customers like TSMC, ASML expects significant growth to resume from 2025, as indicated by CEO Peter Wennink during an analyst conversation.

Impact of US export measures

Both TSMC and ASML have responded to recently announced US export measures aimed at restricting China’s development in artificial intelligence and its potential military applications.

TSMC believes that the short-term impact of these measures will be “limited” and “manageable”, but uncertainties remain about the long-term effects. ASML expressed similar sentiments earlier this week. The Dutch government’s decision to implement export restrictions from January 1, 2024, could result in a 10% to 15% reduction in machine exports this year, according to Wennink.