Growth in Artificial Intelligence Technology Drives Demand
Taiwan Semiconductor Manufacturing (TSMC), the world’s largest third-party semiconductor chip manufacturer, has reported its monthly sales for September, exceeding expectations and indicating a positive outlook for the consumer-electronics sector.
Despite an overall slowdown in the chip market, TSMC’s figures for the September quarter showcased better-than-anticipated performance. TSMC’s revenue for the month experienced a 13% decline compared to the previous year and a 4.4% drop from August.
TSMC’s monthly reports revealed that its quarterly sales reached 546.7 billion Taiwanese dollars, equivalent to approximately $17.0 billion. Analysts had predicted sales of 534.8 billion Taiwanese dollars, according to a FactSet consensus. Notably, TSMC is a key supplier for major tech giants such as Apple (AAPL), Qualcomm (QCOM), and Advanced Micro Devices (AMD), providing them with their main processors.
In response to the positive sales results, American depositary receipts of TSMC showed a 1.0% increase in premarket trading on Friday.
Overall, TSMC’s robust performance, fueled by the demand for artificial intelligence technology, signifies a promising outlook for both the chip maker itself and the broader consumer-electronics industry.
The Role of AI Training Chips in TSMC’s Success
The demand for AI training chips has soared in recent years, posing a crucial question for Taiwan Semiconductor Manufacturing Company (TSMC): to what extent has this demand offset the weakness in smartphones and consumer electronics?
According to independent analyst Richard Windsor, who publishes Radio Free Mobile, this is a key factor to consider. TSMC, which produces chips designed by Nvidia (NVDA), has seen these chips become the go-to processors for AI applications. However, supply bottlenecks have become problematic for the industry. In an attempt to overcome the scarcity of AI processors, OpenAI, the developer of ChatGPT, is reportedly exploring the option of designing its own chips.
Despite the immense demand for AI chips, Windsor believes it is unlikely that higher-than-expected sales of these chips have contributed significantly to TSMC’s sales surprise. In fact, he asserts that there are no more AI chips available for sale at the moment.
However, Windsor does suggest that there may be a potential stabilization in inventories of semiconductors used in consumer electronics. This development would be particularly beneficial for Qualcomm, a company that supplies chips to Apple but has been negatively impacted by a slower-than-expected recovery in Chinese consumer spending and a weak global smartphone market.
In premarket trading, Qualcomm shares experienced a 0.6% increase.
