TSMC upbeat on outlook as robust AI demand offsets tariff uncertainty
FILE PHOTO: A logo of chip giant TSMC can be seen in Tainan, Taiwan December 29, 2022.REUTERS/Ann Wang/File Photo
TAIPEI: The world's largest contract chip maker, TSMC, gave a bullish outlook for the year on robust demand for AI applications, adding that it had yet to see any change in customer behaviour, despite uncertainty over US tariffs.
The Taiwan company, a bellwether for the global chip industry, stood by its annual outlooks for sales and capital spending on Thursday and forecast artificial intelligence (AI) chip revenue to double.
Its Frankfurt-listed shares leapt 5 per cent in morning trade.
The forecast comes despite headwinds such as tighter US export controls on chips for China, including a recent decision to curb sales of a key Nvidia product, threats from US President Donald Trump to levy tariffs on semiconductors as well as his planned broader reciprocal levies on imports.
"We certainly are mindful of the potential impact from all the recent tariff announcements, especially the impact on end market demand," Chief Executive CC Wei told an earnings call.
"Having said that, we have not seen any change in our customers' behaviour so far. So we are sticking to our forecasts."
TSMC is not getting involved in tariff talks, added Wei, who unveiled an additional US$100 billion investment in the United States last month, while standing beside Trump at the White House.
"This kind of tariff discussion is between countries. We are a private company," he said.
Wei also said Taiwan Semiconductor Manufacturing Company was not in talks with other companies about joint ventures, technology licensing, transfer or "sharing", but did not elaborate.
The comments follow media reports that the company could take a stake in a joint venture with floundering US chip company Intel.
Chief Financial Officer Wendell Huang said capital expenditure for this year was expected to be between US$38 billion and US$42 billion, the same forecast given on the last earnings call in January.Â
For the second quarter, the company expects revenue of US$28.4 billion to US$29.2 billion, outpacing US$20.8 billion for the same period a year earlier, while for the full year, it expects revenue growth roughly midway between 20 per cent and 30 per cent.
TSMC is in the strongest position among chip companies to pass on any tariff-related price increases to customers, said Gary Tan, a portfolio manager at Allspring Global Investments.
Its net profit for January-March climbed 60 per cent on the year to T$361.6 billion (US$11.1 billion), its fourth straight quarter of double-digit growth, comfortably beating an LSEG SmartEstimate of T$354.6 billion.
In a sign that US controls on chip exports to China are having their desired effect, TSMC's revenue from China dropped to 7 per cent of total sales from 9 per cent a year earlier, while North America generated 77 per cent, up from 69 per cent.
TSMC's planned US investment, now at US$165 billion, is key to the US chip industry and bringing more production there would remove a major supply chain risk for customers, among them Qualcomm and Advanced Micro Devices.Â
Wei said he expected about 30 per cent of the company's capacity for its latest 2-nanometer and more advanced chips will be located in Arizona after the US plants are completed.
TSMC's shares have fallen this year, as have many chip stocks. Its Taipei-listed shares are down about 20 per cent, for their worst start to a year in at least three decades as foreign investors flee.
Foreign investors have sold US$8.66 billion worth of TSMC shares this year after buying US$2 billion last year and $10.4 billion in 2023, Goldman Sachs said in a report.
Other factors to sap sentiment included investor jitters about spending on AI infrastructure and competitive threats such as Chinese startup DeepSeek's launch of cheaper AI models.
Though TSMC's earnings report came after the market closed in Taipei, the upbeat results helped lift shares of Japanese tech firms and some European companies.
On Wednesday, ASML, the world's biggest supplier of computer chip-making equipment, said tariffs were increasing uncertainty around its 2025 and 2026 outlook, but stood by its annual guidance.
