TSMC Exceeds Q1 Expectations on Strong AI Demand

Although TSMC's customers ordered fewer mobile chips in the first quarter compared to the same period last year, the company's revenue still exceeded expectations.

TSMC today announced sales for the three months ending March 31 reached NT$839.25 billion, approximately US$25.8 billion, marking a 41.6% increase from the previous year. Analysts had anticipated a slightly slower growth rate.

As the world's largest contract chip manufacturer, TSMC produces over 11,000 types of processors serving around 500 clients. Last year, its factories manufactured semiconductors equivalent to 16 million 12-inch wafers, representing most of the global supply of chips produced using advanced manufacturing processes.

The majority of TSMC's revenue comes from its high-performance computing segment, including data center GPUs. This division accounted for 59% of its first-quarter sales, showing a 7% increase from the same period last year. This growth helped offset reduced demand in smartphone and connected device markets, where TSMC's sales fell by 22% and 9%, respectively.

"Our first-quarter business was affected by seasonal factors in smartphones but was partially offset by continued growth in AI-related demand," said TSMC Chief Financial Officer Wendell Huang.

TSMC's revenue growth contributed to enhanced profitability. The company ended the first quarter with a net income of NT$361.56 billion, approximately US$11.12 billion. Adjusted earnings per share were US$2.12, surpassing the FactSet consensus estimate of US$2.07.

TSMC defines advanced processes as those using seven-nanometer or more sophisticated technologies, which accounted for 73% of its wafer production in the first quarter. The company's most advanced production lines manufacture three-nanometer chips. These chips represented 22% of TSMC's revenue in the previous quarter, remaining consistent with last year, but the company expects this technology to become a significant growth driver in the current quarter.

"Entering the second quarter of 2025, we expect our business to be supported by strong growth in three-nanometer and five-nanometer technologies," Huang said.

The company's long-term growth strategy focuses on its two-nanometer node, which is scheduled to enter mass production later this year. On Monday, AMD announced it would use this node to manufacture its upcoming Venice series server-grade CPUs, with these chips expected to begin shipping next year.

TSMC's two-nanometer node is the company's first to utilize gate-all-around transistors. In these transistors, components that coordinate electron flow block power leakage more effectively, improving energy efficiency. TSMC stated that chips manufactured with its two-nanometer process can deliver the same performance while consuming 24% to 35% less power than the previous generation of silicon.

According to reports, the company's long-term technology roadmap also includes a transition to square wafers. Earlier this week, Nikkei Asia cited sources saying that TSMC plans to pilot this technology in 2027. Square wafers have a larger surface area compared to the industry-standard circular wafers currently processed in factories, meaning they can be used to produce more chips.

However, despite TSMC's roadmap potentially involving significant changes to its manufacturing operations, taking over Intel's factories is apparently not part of the plan. Earlier this month, there were reports of an initial agreement between the two companies to form a joint venture to operate Intel's facilities. Today, TSMC CEO C.C. Wei told investors that such a project is not on the agenda.