“We are unbeatable”, says TSCM chairman

Mark O'Neill July 24, 2024 22:01

“Our technology is always the leader in our sector, so we stand in a very favourable position. No-one can compete with us. TSMC will continue to maintain this superiority.”

These were the proud words of chairman C.C. Wei (魏哲家) at a rare news conference after the announcement of stellar second-quarter results by his company Taiwan Semi-conductor Manufacturing Company. He has every reason to be proud.

Consolidated revenue in the quarter was NT$673.51 billion, an increase of 40.1 per cent over the same period in 2023. Net income was NT$247.85 billion, up 36.3 per cent, and diluted earnings per share NT$9.56, also an increase of 36.3 per cent.

Of total wafer revenue, 67 per cent came from advanced technologies, including seven-nanometres and more advanced chips.

Wei said that the company was maintaining its plan to spend US$30 billion to US$32 billion this year in capital investment, in giant plants in Phoenix, Arizona, Kumamoto in Japan and Dresden in Germany.

On July 8, TSMC ADR shares in New York rose 4.8 per cent after the opening bell to exceed US$1 trillion in market value for the first time.

Driving this boom is the rapid growth in Artificial Intelligence and smart telephones.
“Our business in the second quarter was supported by strong demand for our industry-leading 3nm and 5nm technologies, partially offset by continued smartphone seasonality,” said Wendell Huang, Senior VP and Chief Financial Officer of TSMC.

“Moving into third quarter 2024, we expect our business to be supported by strong smartphone and AI-related demand for our leading-edge process technologies,” he said.

The company forecast third-quarter revenue at between US$22.4 billion and US$23.2 billion, and, based on an exchange rate assumption of US$1 to NT$32.5, gross profit margin between 53.5 per cent and 55.5 per cent and operating profit margin between 42.5 per cent and 44.5 per cent.
TSMC makes an estimated 90 per cent of the world’s most advanced semi-conductor chips. Some consider it the most important company in the world, because these chips are used in so many industries – including jet fighters, automobiles, smart phones, computers, domestic appliances and AI applications.

Wang Mei-hua, Taiwan’s Economics Minister from June 2020 to May this year, said that Taiwan was essential to the manufacturing of the world, making servers, graphic cards and circuit boards in addition to semi-conductors.

“If we were not able to supply the international markets, the entire world economy would be paralysed. U.S. Secretary of State Antony Blinken has estimated that the economic consequences on a global level would be disastrous, especially for China. The consequences would be more severe than those of the war in Ukraine,” she said.

On May 7, Taiwan’s Executive Yuan announced funding of US$9.25 billion between 2024 and 2024 for the Taiwan Chip-based Industrial Innovation Program under the National Science and Technology Council.

It will focus on integrating generative AI with chip manufacturing, training personnel, innovative technologies in IC design and attracting international start-ups and investment.
For Taiwan, this dominance in chip production has become a major card in its global diplomacy to protect the island from a Chinese invasion or blockade.

Would the public in Japan, South Korea and the United States be willing to send their soldiers to die to save Taiwan from China? The answer is not so clear.

More convincing with the governments and business communities of Taiwan’s allies is the argument that the world’s manufacturing depends on the island and the fact that they do not wish to see TSMC and other high-tech producers fall under Chinese control.

TSMC’s new giant plants in Japan, the U.S. and Germany are a result of the wish of these countries to reduce their dependence on imported chips. All three are providing billions of dollars in aid and loans to TSMC to persuade it to make the investment.

In Phoenix, TSMC will build three fabs with a total investment of US$65 billion, the largest FDI in Arizona history and largest FDI in a greenfield project in U.S. history.

Asked about the higher costs of the Phoenix project, Wei said: “Yes, costs in the U.S. are higher than in Taiwan. But our objective is to make our factory more competitive than those of our rivals in the U.S. In our foreign projects, we must be more flexible. But, in our operations in every place, our values are the same. Our foreign projects will attract foreign talent.”

Mark O'Neill

A Hong Kong-based writer, teacher and speaker.