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Resilient performance despite seasonality
In the first three months of the year, TSMC recorded revenue of NT$839.3bn, up 3.4% sequentially, although bang in line with market expectations. EPS stood at TWD 13.94, while the gross margin, although down slightly, remained solid at 58.79%, reflecting rigorous management in a context of weak demand in the smartphone segment. The outlook for the second quarter points to a gradual return to growth, with revenue expected to increase by 5%-8%, driven by the ramp-up of advanced processes (N3/N5). However, gross margin is expected to decline slightly to between 57% and 59% due to the ramp-up of the US plant.
AI as a driver, but not a panacea
As a real catalyst for demand, artificial intelligence remains a strategic pillar for TSMC, which expects its revenue from AI accelerators to double by 2025. This trend is part of a robust and prolonged growth cycle, which the company intends to capture fully thanks to its technological lead and cutting-edge production capabilities. To this end, it plans to account for a significant share of advanced chip manufacturing in the United States by 2028-2029, consolidating its key role in US technological sovereignty. However, this momentum masks signs of moderation in other segments, starting with smartphones, IoT and automotive, where the recovery remains tentative.
Strong increase in capex, strengthened commitment to the United States
TSMC plans to invest heavily this year, with an investment budget of between US$38bn and US$42bn, representing a 27% to 41% y-o-y increase. These investments are mainly aimed at supporting advanced technology nodes (N5, N3, N2), but also at strengthening the group's industrial presence in the United States. The flagship project remains the Arizona plant, which is expected to eventually produce up to 30% of the group's most advanced semiconductors. This site represents a strategic pivot in the current context of value chain relocation, while responding to US political demands to reduce dependence on Asian capacity.
Regulatory pressures and compliance risk management
Against a backdrop of ongoing tensions between China and the US, regulatory compliance is becoming a key issue for TSMC. The company has recently come under increased scrutiny after it was discovered that some of its chips, manufactured for a third-party customer, had been diverted to Huawei in violation of US sanctions. TSMC claims to have halted the deliveries in question, alerted the relevant authorities last October, and is now strengthening its internal control mechanisms. However, it stresses that its position as a foundry—a manufacturer with no involvement in the design or distribution of the final products—limits its ability to trace the end use of its chips, opening the door to possible circumvention by intermediaries.
Technological leadership remains intact
Despite these uncertainties, TSMC maintains a significant lead over its competitors in advanced processes and packaging, two key differentiators in the semiconductor industry. The group remains cautious about Intel's ambitions in the foundry business, believing that the competitive threat remains limited in the medium term. It also denies any plans for a joint venture or technology transfer with Intel, putting an end to recent speculation.
Stockmarket outlook
Regarding its stockmarket, a rebound is considered possible in the near term, provided that no significant revisions to EPS dampen the trajectory. In the medium term, TSMC's solid business model, capital discipline and strategic positioning make it a key player in the global digital transition, with growing exposure to the most promising themes of the moment: AI, technological sovereignty and advanced innovation. Despite geopolitical turmoil and regulatory challenges, TSMC has demonstrated a remarkable ability to navigate a demanding environment while maintaining an ambitious but realistic growth trajectory. Industrial rigor in support of a well-managed long-term strategy—the hallmark of leaders.
