TSMC posts record quarterly profit on AI demand, but cautious on tariff impact
Saying demand for AI was getting stronger and stronger, TSMC predicted another leap in sales for the third quarter and hiked its revenue outlook for the full year.
It also noted that key client Nvidia had recently been allowed by the US government to resume sales to China of its H20 AI chip.
'China is a big market, and my customer can continue to supply the chip to the big market, and it's very positive news for them and in return it's very positive news for TSMC,' chief executive CC Wei told a press conference.
But momentum for Q4 earnings could be different. 'We are taking into consideration the possible impact of tariffs and a lot of other uncertainties, so we are becoming more conservative,' Wei noted, though he added that TSMC had yet to see any changes in customer behaviour so far.
In the April-June quarter, net profit hit a historic high of NT$398.3 billion (S$17.4 billion), up 60.7 per cent year-on-year and marking its fifth straight quarter of double-digit growth. That was well ahead of a NT$377.9 billion LSEG SmartEstimate.
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For the current quarter, it predicted a leap in revenue of up to 40 per cent and for the full year, it now estimates revenue growth of around 30 per cent in US dollar terms, up from a previous forecast of 'close to the mid-20s'.
But while sales are roaring, TSMC said the New Taiwan dollar's appreciation against the US dollar – around 12 per cent so far this year – would dent margins.
Its Q3 gross margin is expected to fall to between 55.5 per cent and 57.5 per cent, down from 58.6 per cent in the second quarter, also hurt by TSMC's ramp-up of investment in new US and Japanese factories.
However, the company stuck to its capital expenditure plan for the year of US$38 billion to US$42 billion, and chief financial officer Wendell Huang said that it was very unlikely that such spending would suddenly drop going forward.
TSMC announced plans for a US$100 billion US investment with US President Donald Trump at the White House in March, on top of US$65 billion pledged for three plants in the state of Arizona, one of which is up and running.
But Trump has said semiconductor-specific tariffs could come soon. Taiwan was also threatened with a 32 per cent reciprocal tariff rate in April, although it has yet to be notified of an updated figure that some countries have received.
Taiwan-listed shares in TSMC surged some 80 per cent last year but have climbed just 5 per cent for the year to date on worries about tariffs and unfavourable currency exchange rates. REUTERS
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