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Taiwan Semiconductor Manufacturing Company’s position at the center of the global artificial intelligence supply chain continues to bear fruit. Escalating geopolitical tensions pose risks to global semiconductor manufacturers, but TSMC’s advantages place it well-positioned to weather potential disruption.
For evidence of TSMC’s strength, look no further than the world’s largest contract chipmaker’s record-setting fourth-quarter results. Net profit reached NT$374.7 billion ($11.4 billion) in the December quarter, with revenue up 39% and sales up 57%, due to rising demand for AI chips and an expanding customer base.
The stock price reflects continued growth. TSMC’s Taipei-listed stock has risen 90% over the past year. Global interest in the stock has also increased, with TSMC’s US deposit receipts increasing 103% over the same period.
Indeed, TSMC’s position is also vulnerable to rising geopolitical risks. The United States is tightening restrictions on chip technology exports to China, adding 27 Chinese and Singaporean companies to the U.S. Commerce Department’s list of companies this week. The latest changes have also expanded the list of affected chips. Restrictions have been tightened on certain types of memory chips, which are a key part of AI chips.
This means TSMC may need to take compliance measures to ensure chips are not diverted to restricted entities. Such controls can inflate costs and complicate relationships with some customers. The company already expects higher costs at new manufacturing plants in the U.S. and Japan to weigh on its gross profit this quarter.
In the long term, TSMC’s sales in the Chinese market may be hurt by the weight of tighter U.S. regulations. Still, the impact on the group’s earnings and outlook is likely to be limited. In any case, TSMC’s revenue from China has declined in recent years, with analysts estimating that the market now accounts for only about one-tenth of the group’s total. This is down from 16% in the second quarter of last year.
Meanwhile, the United States remains an important market for TSMC. Apple and Nvidia are some of the company’s biggest customers. North America accounted for 65% of TSMC’s total net revenue in the second quarter of last year. The company has made significant investments in the United States, including $65 billion in a facility in Arizona.
If Donald Trump returns to the US presidency, geopolitical diplomacy could become as important to TSMC’s future as technological prowess. However, given its current growth rate and strong customer base, it should continue to outperform its peers.
june.yoon@ft.com
