Taiwan Semiconductor Manufacturing Co (TSMC) has shattered its financial records, reporting an all-time high quarterly net profit of T$374.68 billion ($11.4 billion) for the final quarter of 2024.
This marks a 57% surge in profit compared to the previous year, driven by unprecedented demand for chips used in artificial intelligence (AI) and advanced computing.
Alongside this achievement, the world’s largest contract chipmaker has projected revenue of $25 billion-$25.8 billion for the first quarter of 2025, reflecting a robust 37% year-on-year growth.
While the AI boom fuels TSMC’s meteoric rise, the company faces mounting challenges, including geopolitical tensions and regulatory constraints.
Expansion drives TSMC’s growth
TSMC’s success is underpinned by its strategic expansion into global markets.
With significant investments in cutting-edge AI chip production, the company has positioned itself as a vital supplier to tech giants like Apple and Nvidia.
TSMC’s 39% revenue growth in Q4 2024 is a testament to this strategy, as demand for AI processing chips continues to outstrip supply.
Capital expenditure remains a key focus, with TSMC committing $38 billion to $42 billion for 2025, marking up to a 41% increase from the previous year.
Major projects include the $65 billion development of three semiconductor plants in Arizona, reinforcing the company’s global footprint.
TSMC has confirmed that Taiwan will remain the hub of its manufacturing operations, ensuring the bulk of its high-volume production stays on home soil.
Despite these advances, TSMC faces growing hurdles. The United States recently tightened technology export controls to China, restricting access to advanced AI chips.
While Taiwan benefits from exemptions as a key US ally, the geopolitical landscape remains precarious.
As the Biden administration enforces policies to reduce reliance on overseas manufacturing, TSMC must balance international expansion with domestic security concerns.
AI boom sustains investor confidence
The global AI boom has proven to be a catalyst for TSMC’s remarkable financial performance. AI and advanced computing now account for a growing share of TSMC’s revenues, driven by an influx of orders from major tech players.
These developments have propelled the company’s market capitalisation, with TSMC’s stock surging 81% in 2024, far outperforming the broader Taiwanese market index, which gained 28.5% during the same period.
Investor sentiment remains bullish, bolstered by TSMC’s optimistic revenue guidance and aggressive capital investments.
Analysts expect TSMC to maintain its growth trajectory as demand for AI and 5G technologies expands further.
However, the company’s reliance on a few large clients, such as Apple, poses a concentration risk.
Any disruptions in client operations or geopolitical tensions could potentially affect its revenue streams.
Potential challenges for TSMC
While TSMC’s financial and operational performance highlights its dominance, the semiconductor industry is not without volatility.
Tensions between the US and China over technology exports have created uncertainty, potentially disrupting global supply chains.
TSMC’s efforts to mitigate these risks by diversifying production sites come with their own challenges, such as managing higher costs and navigating complex regulatory environments.
The evolving competitive landscape poses a threat. Rivals in South Korea, Japan, and mainland China are ramping up investments to close the technology gap, intensifying the fight for market share.
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