As the artificial intelligence (AI) industry grows, demand for AI chips is surging, and Nvidia, the No. 1 player in the AI chip market, has become TSMC's largest customer. Until now, Apple, which outsources mass production of processors for smartphones, tablets and PCs, had been TSMC's largest customer.
According to TSMC's business report on the 4th, there are two corporations that each account for more than 10% of TSMC's revenue. Although it did not disclose the customers' names, the revenue shares were 19% (Customer A) and 17% (Customer B), with Customer A at 19% up 7 percentage points (p) from a year earlier. The industry interprets this as Nvidia. The customer with 17% is widely presumed to be Apple, whose share fell 5 percentage points from 22% a year earlier.
TSMC's revenue last year reached 3.809 trillion Taiwan dollars (about 177.766 trillion won), up 31.6% from a year earlier, hitting a record high.
Apple had long held the position of TSMC's largest customer. Apple currently entrusts virtually all processors for smartphones, tablets and PCs to TSMC. With iPhone shipments alone exceeding 200 million units annually, volumes are high, and leading-edge foundry (contract chip manufacturing) nodes are typically first applied to mobile application processors (APs), so TSMC developed and deployed processes and packaging solutions tailored to Apple products first. But as the AI industry has grown rapidly, Nvidia appears to have taken Apple's place.
Analysts say Nvidia's revenue share will expand further this year. The Taiwan Commercial Times reported, "Nvidia's contribution to TSMC's revenue is expected to exceed 20% this year, and Nvidia is expected to further cement its position as TSMC's largest customer." Demand for computing for Generative AI and large language models (LLMs) is surging, boosting production of Nvidia's AI graphics processing units (GPUs) and other products. TSMC is rapidly ramping its capacity in step with Nvidia's increased orders.
As Nvidia's orders increase, TSMC's overseas business profitability is also improving. To spread the geopolitical risks heightened by tensions with China and to align with the Trump administration's Made in USA stance, TSMC is tightening efforts to expand U.S. production lines. After beginning mass production on the 4-nanometer (nm; one-billionth of a meter) node in the fourth quarter of 2024, the TSMC Arizona plant turned profitable for the full year last year, recording operating revenue of 16.141 billion Taiwan dollars.
A semiconductor industry official said, "As the AI industry grows, demand for AI chip production from big tech corporations such as Nvidia, AMD and Google is increasing sharply," adding, "Given that the Arizona unit is focused on mass-producing chips for U.S. big tech corporations, its profitability is structurally bound to improve."