TSMC Earnings Sets Stage for Strong 2024

January 18, 2024 / Ben Bajarin

TSMC latest earnings commentary provides a positive outlook for the semiconductor industry in 2024.

Key Takeaways

  • Revenue Growth Forecast: TSMC expects 2024 to be a year of healthy growth with a projected increase in revenue of low-mid 20% in US$ terms. This growth is expected to outperform the wider semiconductor industry excluding memory (>10% YoY) and foundry industry growth (approximately 20%).
  • Technology Leadership and Demand in Advanced Nodes: TSMC is driving its growth with the industry-leading 3nm and 5nm technology nodes. It anticipates strong demand for these technologies to continue given the ongoing requirements for high-performance computing (HPC) and AI applications. Advanced technologies (7nm and below) accounted for 67% of total revenue in 4Q23 and will continue to be key revenue drivers for TSMC in 2024.
  • Investments in Capacity and Capital Expenditure (Capex): To support and capture the anticipated growth in AI, HPC, and 5G mega-trends, TSMC has a capital expenditure target of US$28-32 billion communicated in January 2023. This capex is aimed at expanding the 3nm/2nm capacity and ensuring TSMC maintains its technological edge.
  • Diversification and Expansion into New Markets: TSMC plans to expand its global manufacturing footprint with fabs in the USA (Arizona), Japan (Kumamoto), and considerations for expansion in Europe. By doing so, TSMC not only plans to secure a closer proximity to key customers but also aims to tap into new markets and global talent pools.
  • Advanced Packaging and AI Revenue: TSMC sees a very strong demand for its advanced packaging technologies like CoWoS, SoIC, and 3D-IC and intends to double output capacity to support its customers. They also forecast that, by 2027, AI-related revenue will constitute a high teens percentage of TSMC’s total revenue due to the increasing incorporation of AI into devices, demonstrating the significant growth potential in the AI segment.

TSMC poised for strong growth in 2024 as the company marches toward $100B in revenue. The main growth drivers continue to be in HPC/AI and notable call outs for 2024 in advanced packaging as more chiplet architectures are designed for more advanced AI compute and high performance applications.

TSMC remains the choice for the leading edge and their 2nm nano-sheet technology with backside power remains on track and these two step functions in process technology will likely continue to keep them in the lead from the standpoint of leading edge demand.

We highlight a few key points from executive commentary from the earnings call:

  • Insatiable AI demand for energy efficient compute power, TSMC most leading edge process technology at scale with dependable & predictable offering
  • As capacity increases, engagement starts much earlier
  • Almost all AI innovators working with TSMC
  • Much higher interest & engagement in N2 compared to N3 from both HPC and smartphones at similar stage

From all our industry checks, from a foundry viewpoint, leading edge capacity remains the biggest challenge for the industry and the primary friction point holding back astronomical growth. This is why capacity buildout from not just TSMC but Intel as well as IFS starts to scale will become increased catalysts for the industry but that is more of a 2026 story to watch.

Another continued dynamic to watch is the role Apple plays in helping TSMC advance to each process node.  We are interested to see if there is more diversity at 2nm from a wider customer set than just Apple.  For context, Apple had >90% share of TSMC 3nm in 2023 and is estimated to have ~60% of 3nm in 2024.  We view it as a positive if TSMC can have more lead customers for 2nm and there appears to be executive commentary that may be the case.

Growth Drivers

High-Performance Computing (HPC): HPC, particularly tied to AI/CPU growth, is noted as a major driver, contributing 43% of sales with a 17% quarter-over-quarter increase in Q423. The company is positioned to capture significant growth opportunities in AI and HPC sectors, with HPC expected to have the highest growth rate, much higher than the corporate average.

3nm and 5nm Technologies: A strong ramp-up of the industry-leading 3nm technology has been reported. Sales distribution across various technologies for Q423 include 15% from 3nm, 35% from 5nm, and 17% from 7nm, with advanced technologies (7nm and below) accounting for 67% of total revenue. For 2023, the 3nm technology represented 6% of sales, indicating it as a future area of growth.

Smartphones Platform: Smartphones have also been important growth contributors, representing 43% of sales and registering a 27% QoQ increase in Q423. However, a decline is expected in smartphones in 2024.

Automotive and IoT: Automotive sales are reported to have a low base rebound with a 13% QoQ increase, and it is projected for moderate QoQ growth in 2024. The IoT segment, in contrast, saw a decline but is identified as a potential area for the application of specialty technologies.

Advanced Packaging Processes: TSMC has noted very strong demand for its CoWoS, SoIC, and 3D-IC advanced packaging processes with plans to double output capacity. The growth rate for these technologies is expected to be more than 50% CAGR over the next three years at least.

AI Revenue Growth: AI-related revenue is expected to have a significant growth rate of around 50% annually, and by 2027, AI is projected to account for a high-teens percentage of TSMC’s revenue. This includes integration into edge devices like smartphones and PCs, where the amount of silicon used for AI applications will increase.

Capital Expenditure and Capacity Expansion: Despite a slower 2023, the company plans for 15-20% growth over the next several years supported by increased capital expenditures, especially for HPC, AI, and 5G megatrends. The capex target communicated in January 2023 was US$28-32 billion.

Global Expansion: TSMC plans to extend its manufacturing footprint globally, building on customer trust and reaching out for global talent. This includes the establishment of new fabs in Arizona, USA, and specialty fabs in Kumamoto, Japan, with discussions ongoing about expansions in Europe.


Earnings Highlights 

Q4 23 Performance:

  • Sales increased by 14.4% quarter-over-quarter (QoQ) to NT$625.5 billion, high-end of the given guidance range of +10-15%.
  • High seasonal demand for smartphones, which represented 43% of sales, increased by 27% QoQ.
  • High-Performance Computing (HPC) on AI/CPU growth contributed 43% of sales, up by 17% QoQ.
  • Automotive sales rebounded by 13% QoQ, despite sharp declines in the IoT and consumer segments by -29% QoQ and -35% QoQ respectively.


  • Gross margins (GM) were at 53%, operating margins (OpM) at 41.6%, both exceeding their respective mid-point guidance of 52.5% and 40.5%.
  • Earnings per share (EPS) was reported at NT$9.21, surpassing the Street’s expectation (NT$8.71).

1Q24 Guidance:

  • Sales are expected to decline marginally by 4-8% QoQ in US$ terms, which is in line with the typical seasonal slowdown following strong end-of-year sales.
  • Profitability is expected to be stable with GMs/OpM range of 52-54%/40-42%, which is notably more resilient compared to the street’s expectations.

Full-Year Projections:

  • The company is expected to grow in the low-mid 20% range, which aligns with expectations and suggests double the rate of growth for the semiconductor industry excluding memory, and for foundries specifically.

Revenue by Platform:

  • There have been significant QoQ movements in revenue by platform for Q4 23 with HPC and smartphones being major sales drivers.
  • The outlook for 2024 indicates flat year-on-year (YoY) performance for HPC, a decline in smartphones and IoT, and a moderate QoQ growth in automotive.

Balance Sheet and Cash Flow:

  • TSMC reported strong cash and equivalents at NT$1.7 trillion.
  • Cash flow from operations was NT$395 billion with a capital expenditure (Capex) that was not fully disclosed in the provided text.

The overall commentary reflects strong performance in Q423 and a sound outlook for Q124. TSMC expects a mild decline in the subsequent quarter but resilient profitability and continues to anticipate significant growth for the full year of 2024.

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