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After a year-long slump that has seen its revenue drop annually for most of the year, the Taiwan Semiconductor Manufacturing Company (TSMC) is slated to post strong first-quarter results next year, according to estimates from analysts. TSMC is the world’s largest contract chip manufacturer, and the firm caters to the needs of big-ticket firms such as NVIDIA Corporation and Apple Inc. Demand for its products has been slow this year as the chip industry digests inventory ordered through optimistic forecasts. However, recent trends have indicated that the supply glut is clearing up, and more orders from its biggest customers can help TSMC touch record first-quarter revenue next year.
TSMC’s Fortunes Expected By Analysts To Recover In Q1 2024 On Back Of High Capacity Utilization & Strong Orders For New Products
2023 has been a historic year for TSMC, not only because of a severe industry downturn but also because the firm successfully ramped up mass production of its advanced 3-nanometer semiconductor fabrication process. The first 3-nanometer products were shipped out earlier this year and made their way to consumers through Apple’s latest smartphones and notebooks.
Apple, NVIDIA and AMD should drive up TSMC’s orders in Q1 2024, according to analysts quoted by Taiwanese media. They believe the first quarter revenue could cross $18 billion in an off-season quarter to market a maximum of 8% sequential drop. The first quarter is generally the slowest for TSMC since few product launches take place in its immediate aftermath. However, the analysts believe that this time, an uptick in orders from its biggest customers will enable TSMC to post strong first-quarter revenue.
The analysts add that not only will TSMC’s sequential revenue drop in Q1 be in single-digit percentages, but that starting from Q1, the firm stands to post consecutive sequential revenue growth. If this bears fruit, it will mark the end of the semiconductor downturn, as TSMC’s broader revenue pie has notably shrunk this year.
Two key reasons behind the anticipated bumper quarter are high capacity utilization rates for TSMC’s 5-nanometer process and higher prices for the 3-nanometer products. 5-nanometer is typically used by the personal computing industry due to its relative maturity and higher production rates compared to the advanced process technologies. For 3-nanometer, Apple is expected to contribute significantly to TSMC’s revenue pie, and the firm’s overall average selling prices are expected to drop by just 0.05% between this quarter and the next.
Another key factor in today’s report is the demand for NVIDIA’s latest products in China. NVIDIA’s advanced GPUs, particularly those used in artificial intelligence applications, have been sanctioned by the U.S. to prevent sales to China. In response, the firm launched brand new data center products for Chinese use this month. These are the HGX H20 and L20 platforms, and estimates suggest that a large volume of these will be needed to meet some performance requirements.
Finally, another potential catalyst for TSMC are AMD’s MI300X products. Designed for AI use, these created quite a bit of hype and also led to significant share price gains for Team Red. Industry sources in Taiwan believe that small volume shipments of the MI300X products are slated to begin next year, with sufficient packaging capacity enabling AMD to gain AI market share in the double digits next year. Since TSMC is AMD’s primary manufacturing partner, there is little skepticism around the fact that the Taiwanese firm will be AMD’s partner of choice regarding AI products.