TSMC's latest earnings data is out
$TSM
Net profit has hit a new record for six consecutive quarters
But
we can see that in the third quarter, TSMC's wafer shipments grew just 9.6% year over year—the lowest level in these six quarters
The figures that contrast with this are not only net profit, but also revenue growth
As shown in my chart, the red and blue lines have moved almost in tandem over the past few quarters. This quarter, however, they diverged far more sharply than in recent quarters
(1) Year-over-year wafer shipment growth slowed further, from 16.6% to 9.6%, while revenue growth in U.S. dollars rose from 33.7% to 41.2%
(2) The gap between them was 31.6 percentage points—the widest divergence in the past six quarters
If this were simply a broad recovery in the semiconductor industry, bringing in more chip orders,
we would expect to see wafer shipment volumes rise in tandem
But revenue is now growing far faster than shipment volumes. This suggests that simply shipping more wafers is not enough to explain this growth, nor does it support the conclusion that the semiconductor industry is broadly recovering
A more likely explanation is a shift in the mix of products customers are buying
So, what type of customer is driving this shift?
The answer is high-performance computing (HPC)
HPC is a business category TSMC defines by end application. It includes AI accelerators, server processors, and other chips related to high-performance computing
These chips typically have demanding performance, power consumption, and manufacturing requirements. Many products require advanced process nodes, and some also need complex advanced packaging
In the same quarter last year, HPC accounted for 57% of TSMC's total revenue. In its latest earnings data, that figure had risen to 68%
Based on a rough estimate using quarterly revenue and business mix, HPC revenue grew approximately 80% year over year in the third quarter
Even more strikingly, HPC growth can explain nearly 90% of TSMC's year-over-year revenue increase this quarter
In other words, other businesses are certainly generating revenue too, but the growth driving TSMC is now heavily concentrated in orders related to high-performance computing
This also explains why TSMC's revenue and wafer shipment volumes are becoming increasingly out of proportion
$TSM
Net profit has hit a new record for six consecutive quarters
But
we can see that in the third quarter, TSMC's wafer shipments grew just 9.6% year over year—the lowest level in these six quarters
The figures that contrast with this are not only net profit, but also revenue growth
As shown in my chart, the red and blue lines have moved almost in tandem over the past few quarters. This quarter, however, they diverged far more sharply than in recent quarters
(1) Year-over-year wafer shipment growth slowed further, from 16.6% to 9.6%, while revenue growth in U.S. dollars rose from 33.7% to 41.2%
(2) The gap between them was 31.6 percentage points—the widest divergence in the past six quarters
If this were simply a broad recovery in the semiconductor industry, bringing in more chip orders,
we would expect to see wafer shipment volumes rise in tandem
But revenue is now growing far faster than shipment volumes. This suggests that simply shipping more wafers is not enough to explain this growth, nor does it support the conclusion that the semiconductor industry is broadly recovering
A more likely explanation is a shift in the mix of products customers are buying
So, what type of customer is driving this shift?
The answer is high-performance computing (HPC)
HPC is a business category TSMC defines by end application. It includes AI accelerators, server processors, and other chips related to high-performance computing
These chips typically have demanding performance, power consumption, and manufacturing requirements. Many products require advanced process nodes, and some also need complex advanced packaging
In the same quarter last year, HPC accounted for 57% of TSMC's total revenue. In its latest earnings data, that figure had risen to 68%
Based on a rough estimate using quarterly revenue and business mix, HPC revenue grew approximately 80% year over year in the third quarter
Even more strikingly, HPC growth can explain nearly 90% of TSMC's year-over-year revenue increase this quarter
In other words, other businesses are certainly generating revenue too, but the growth driving TSMC is now heavily concentrated in orders related to high-performance computing
This also explains why TSMC's revenue and wafer shipment volumes are becoming increasingly out of proportion