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TSMC Q3 Earnings Preview: After ASML's Disappointing Orders, Can TSMC Sustain AI Momentum?

AInvestWednesday, Oct 16, 2024 6:46 am ET
1min read

Following ASML’s underwhelming results, attention now turns to TSMC, which is set to release its third-quarter earnings report on Thursday. Market expectations place TSMC’s Q3 revenue at 750.53 billion New Taiwan dollars, a year-on-year (YOY) increase of 37.27%, and net income at 299.3 billion New Taiwan dollars, representing 42% YOY growth.

While TSMC has already disclosed its monthly sales, the key focus of this report will be its gross margin and the guidance for the fourth quarter, particularly given the sharp shortfall in ASML’s orders.

TSMC's Q3 sales reached 760 billion New Taiwan dollars, not only surpassing market consensus but also exceeding the company’s previous guidance.

A major tailwind for TSMC is the launch of new products from its key clients, including Apple, Nvidia, AMD, and Qualcomm, all of which rely heavily on TSMC’s advanced process technologies. According to Li Fang-kuo, chairman of President Capital Management, this highlights the strength of TSMC’s order book.

TSMC's growth momentum in Q3 has been driven primarily by high-performance computing, especially AI chips. Strong demand for Micron’s HBM3E memory and Nvidia's Blackwell chips suggests continued robust demand for GPUs targeting datacenters, benefiting TSMC as their primary foundry.

Additionally, a report by Canalys shows a 5% YOY increase in global smartphone shipments in Q3, further boosting chip demand.

On the profitability front, TSMC is expected to see an increase in average wafer selling prices due to the rising contribution of sub-7nm processes. TSMC also plans to raise prices on its 3nm chips by more than 5%, with advanced packaging prices set to increase by 10% to 20% next year, all of which are likely to positively impact its gross margin.

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