The global semiconductor arena has grown increasingly competitive, with numerous players vying for larger market shares. Against this backdrop, TSMC has delivered a standout performance, particularly in the third quarter of 2024. According to the latest filings, the company posted a net profit of NT$325.3 billion for the quarter, marking a 54% increase from the same period last year and comfortably surpassing the market consensus of NT$299.3 billion. What underlying trends does this better‑than‑expected result reveal?
Net sales for the third quarter totalled $23.5 billion, exceeding the company’s own guidance range of $22.4‑23.2 billion by $300 million. September sales alone rose 39.6% year‑on‑year, a growth rate not witnessed since July 2024. This momentum is largely fuelled by robust demand from the artificial intelligence sector, as technology firms continue to ramp up investments in cutting‑edge AI chips. For a strategically positioned foundry like TSMC, this tailwind is undeniably positive.
TSMC had already delivered a “surprise” performance in the second quarter, with sales reaching NT$673.5 billion and operating profit NT$286.2 billion. Compared to the previous quarter, sales grew 13.6%, and year‑on‑year they jumped 40.1%, exceeding equity market expectations by 2.1%. Operating profit similarly advanced 13.2% sequentially and 41.7% annually, beating consensus estimates by roughly 5%.
The company’s competitive edge stems from relentless innovation in advanced process nodes and packaging technologies. As TSMC noted in its statement, “strong demand for our industry‑leading 3nm and 5nm technologies in smartphone and AI applications provides solid support for our business.” TSMC has consistently pioneered smaller geometries, being among the first to mass‑produce 5nm and 3nm chips, thereby offering clients superior performance and lower power consumption. This not only cements its dominance in the high‑end foundry market but also lays a robust technological foundation for future growth. The successful development and mass production of 2nm technology will further sharpen its competitive advantage.
Financial data for Q3 2024 reveal that the 3nm process began contributing materially to revenue, accounting for 20% of total wafer sales during the quarter—a clear sign that this leading‑edge node has achieved commercial viability. The 5nm node maintained its market leadership with a 32% share, while the 7nm node, though declining, remained stable at 17%. Notably, advanced nodes of 7nm and below collectively represented 69% of wafer revenue, underscoring TSMC’s technological prowess and market leadership.
In terms of business segments, AI chip foundry services sustained strong growth, while the smartphone business rebounded further, driven by increased iPhone shipments. Specifically, the HPC (high‑performance computing) platform captured the largest revenue share at 51%, up 11% year‑on‑year; smartphones contributed 34%, a 16% increase; IoT accounted for 7%, growing 35% annually; and automotive held 5%. The only segment to decline was DCE (digital consumer electronics), which fell 19% year‑on‑year.
Looking ahead, TSMC is expected to continue benefiting from orders for Apple’s new iPhone processors, as well as new chips from mobile vendors MediaTek and Qualcomm. Moreover, sustained strong demand for AI accelerators is likely to drive further revenue growth in the fourth quarter. In its earnings call, management guided Q4 sales between $26.1 billion and $26.9 billion, implying a 13% sequential increase and a 35% year‑on‑year rise at the midpoint. Gross margin for Q4 is projected at 57‑59%. In dollar terms, full‑year 2024 sales are expected to grow nearly 30%.
In stark contrast, lithography giant ASML experienced a setback. Its Q3 report, released on October 15, showed that while overall revenue beat expectations, new orders for the quarter totalled only €2.6 billion, far below the €5.39 billion consensus. The news sent ASML’s stock plunging 16.26% on the day—its worst single‑day drop in nearly 26 years—and dragged down the broader U.S. chip sector. Industry sources indicate that ASML and TSMC executives are about to enter price negotiations for 2025 equipment procurement, with ASML seeking a 3‑5% price increase.
In summary, TSMC’s outstanding Q3 results have further solidified its industry leadership and signal ample future growth potential. Nevertheless, as market dynamics evolve and competition intensifies, TSMC must continually adapt to emerging demands and strengthen its internal growth drivers. Entering the upcoming fourth quarter, all eyes are on whether the company can sustain its impressive financial performance—a question that will undoubtedly remain a central focus for investors.