Taiwan Semiconductor Manufacturing reported a drop in sales for December but beat expectations for the quarter overall. Demand for artificial-intelligence chips looks set to propel a recovery in demand going forward.
TSMC,
the world’s largest third-party chip manufacturer, said Wednesday that revenue for December fell 8.4% from the same period a year before and was down 14% from November.
While the monthly decline looks bad, it means revenue for the December quarter overall was broadly flat from the prior year, beating expectations and potentially indicating a recovery in chip demand heading into 2024.
TSMC’s
monthly reports indicate its quarterly sales came to 625.5 billion Taiwanese dollars, or around $20.1 billion. Analysts had forecast quarterly sales of 615.8 billion Taiwanese dollars, according to a FactSet poll.
American depositary receipts of TSMC were broadly flat in premarket trading on Wednesday.
TSMC makes the main processors inside
Apple
iPhones,
Qualcomm
mobile chipsets, and processors made by Advanced Micro Devices. It is also the main manufacturer of artificial-intelligence chips for
Nvidia,
which leads the market for graphics processing units, or GPUs, used for AI applications.
While TSMC therefore stands to benefit from the AI boom, chips powering such systems remain only a small part of its business and haven’t been enough to offset the drag from slower demand for consumer electronics so far. Taiwan’s overall sales for 2023 were down 4.5% from the previous year.
TSMC—and its customer
Nvidia
—have struggled to meet demand for AI chips. TSMC management has confirmed plans to double advanced chip-packaging capacity, called CoWoS, by the end of 2024. CoWoS is needed to make Nvidia’s highest-performing AI chips.
“The big ramp-up of CoWoS at TSMC suggests supply/demand parity could even be reached in GPUs for AI training by year-end,” analysts at Deutsche Bank wrote in a research note on Wednesday.
Nvidia shares were up 1.1% in premarket trading while Apple was up 0.1%. Among other companies supplied by TSMC, Qualcomm was rising 0.6% and AMD was up 0.7%.
Write to Adam Clark at adam.clark@barrons.com
Read the full article here