TSMC’s response to the surging demand for AI processors

TSMC, the planet’s largest chipmaker, and a major supplier to Apple and Nvidia, predicts that second-quarter sales may increase by as much as 30% as it rides a wave of need for semiconductors used in artificial intelligence (AI) apps.

As the demand for processors for artificial intelligence (AI) continues to surge, Taiwan Semiconductor Manufacturing Co (TSMC) finds itself at the forefront of addressing this need. During the company’s first-quarter earnings call, CEO C.C. 

Wei emphasized the overwhelming demand for energy-efficient computing power driven by AI innovations, with TSMC emerging as a key partner for AI innovators.

Strong Demand for AI Servers

Wei highlighted the robust demand for AI-related data centers, noting a significant shift from traditional servers to AI servers, which he deemed favorable for TSMC. 

This surge in AI-related demand has played a pivotal role in bolstering TSMC’s performance, particularly amid the tapering off of COVID-19 pandemic-led electronics demand, propelling the company’s stock to record highs.

Projections for AI Server Revenue

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TSMC anticipates that AI servers will contribute to a low-teens percentage of its revenue in 2024, more than doubling from the previous year. Furthermore, the company expects this figure to surpass 20% of revenue by 2028, underscoring the growing significance of AI-related technologies in its portfolio.

Shift in Auto Chip Demand

Despite the surge in AI-related demand, TSMC noted a decline in demand for auto chips compared to previous estimates of growth. This shift reflects changing market dynamics and emphasizes the company’s adaptability to evolving industry trends.

Outlook and Capital Spending

Looking ahead, TSMC foresees strong demand for its industry-leading 3 nanometer (nm) and 5nm technologies in the second quarter, albeit partially offset by sluggish demand for smartphones. 

The company maintains its capital spending guidance for the year, with a focus on advanced technologies to meet evolving market demands.

Revenue Projection and Market Uncertainties

For 2024, TSMC expects revenue to rise in the low- to mid-20% range in U.S. dollar terms. However, the company acknowledges lingering macroeconomic and geopolitical uncertainties that could impact consumer confidence and end-market demand, highlighting the need for continued vigilance and adaptability in navigating the evolving landscape.