Taiwan TSMC, the world's largest foundry (semiconductor contract manufacturing) corporations, posted its highest-ever results for the third quarter (July–September) on the back of expanded investment in artificial intelligence (AI) infrastructure. TSMC raised its forecast for next year's revenue growth and this year's capital expenditures, saying demand for AI semiconductors will remain strong.
TSMC said on the 16th (local time) that third-quarter net profit rose 39.1% from a year earlier to 452.3 billion Taiwan dollars (about 21 trillion won). It was a quarterly record and about 8% above market expectations (417.7 billion Taiwan dollars). Revenue for the period was 989.9 billion Taiwan dollars (about 46 trillion won), up 30.3% year over year and also a record high. Operating profit was 500.7 billion Taiwan dollars (about 23 trillion won), with an operating margin of 50.6%.
The strong results were thanks to a surge in demand for AI semiconductors. TSMC is a key manufacturing partner for global major fabless (semiconductor design corporations) such as Nvidia, AMD, and Apple. TSMC stressed that orders for high-performance computing (HPC) chips for AI training and inference are skyrocketing. Nvidia's cutting-edge GPUs (graphics processing units) "Blackwell," Google's in-house AI chip TPU, and Apple's M-series processors are all being produced on TSMC's advanced nodes.
In the third quarter, revenue from TSMC's advanced processes at 7-nanometer (1 nanometer is one-billionth of a meter) and below accounted for 74% of total revenue. By application, high-performance computing (HPC) made up about 57%, smartphones about 30%, and the automobile and Internet of Things (IoT) segments about 5%.
TSMC raised its outlook for next year's revenue growth from 30% to 35%. It judged that demand for AI semiconductors would continue as structural growth rather than a temporary fad. The company also increased this year's capital expenditure (CAPEX) plan from $38 billion to $40 billion–$42 billion (about 56.7 trillion–59.5 trillion won). It plans to focus investment on expanding advanced processes, adding packaging facilities, and building production lines for AI semiconductors.
Wei Zhejia, TSMC chief executive officer (CEO), said on a conference call after the earnings release, "AI has established itself as a long-term growth pillar of the semiconductor industry," adding, "Demand for HPC and AI chips is driving a recovery across the memory, mobile, and automobile markets." He added, "Orders from clients are increasing faster than expected, making capacity expansion unavoidable."
However, geopolitical variables remain a source of uncertainty. The U.S. Trump administration's 20% tariff policy on products from Taiwan currently exempts semiconductors, but there are concerns that the policy stance could change at any time. In addition, with U.S. Commerce Secretary Howard Lutnick recently noting that "half of Taiwan's semiconductor production capacity should be transferred to the United States," pressure on TSMC has intensified.
To respond to geopolitical risks, TSMC is accelerating diversification of its overseas production bases. TSMC will invest $165 billion (about 234 trillion won) in Arizona to build six semiconductor plants, two packaging facilities, and one research center. Plans to build new fabs in Kumamoto, Japan, and in Europe are being pursued in parallel. However, on the day, CEO Wei Zhejia said, "TSMC is strengthening its global supply chain in line with client demands, but Taiwan will remain the center of our core technology and manufacturing competitiveness."