TSMC. The Juggernaut Accelerates!

better either get on board or get out of the way!

TSMC’s Q224 earnings call brought little in the way of surprise in terms of the key financial metrics, given that we already knew what most of them were ahead of time. Gross margin coming in at 59%, at the very top of the guided range, was the icing on the cake. Q125 guidance of $25.4 billion at the midpoint, down 5.5% QoQ, was almost exactly what we forecasted in our preview.

Based on the current business outlook, we expect our first-quarter revenue to be between $25 billion and $25.8 billion, which represents a 5.5% sequential decline or a 34.7% year-over-year increase at the midpoint.

In his prepared remarks, CEO C.C. Wei grabbed the bull by the horns and gave us a very strong guide for full year 2025:

Supported by our technology leadership and broad customer base, we are confident we can continue to outperform the industry growth. We expect 2025 to be another strong growth year for TSMC, and forecast our full-year revenue to increase by close to mid-20s% in US dollar term.

This was definitely a surprise to the upside, given we had predicted growth in the mid-teens range. Keeping in mind the original 2024 full year guidance from the Q423 earnings call, I’ll take the latest guide with a grain of salt and expect that we shall see a second successive year of ~30% growth

We expect our business to grow quarter-over-quarter throughout 2024, and our full year revenue is expected to increase by low to mid-20% in U.S. dollar terms.

For the record, C.C. Wei stated that 2024 foundry growth came in at 6%, lower than what they had originally forecasted, a testament to the broader recovery that never really materialised last year

Concluding 2024, the Foundry 2.0 industry, which we define as all logical wafer manufacturing, packaging, testing, mask-making, and others increased 6% year over year, slightly lower than our previous forecast.

Looking ahead, he now expects “Foundry 2.0” to grow by 10% this year.

We forecast the Foundry 2.0 industry to grow 10% year over year in 2025, supported by robust AI-related demand and a mild recovery in other end market segments.

When pressed during the Q&A as to what his semiconductor ex memory growth forecast was, the agreed that the Foundry 2.0 forecast could be used as a proxy.

There was more good news on the future outlook front:

For the five-year period starting from 2024, we expect our long-term revenue growth to approach a 20% CAGR in US dollar term, fueled by all four of our growth platforms, which are smartphone, HPC, IoT and automotive.

For those of you keeping track, you may recall that TSMC has, for around four years now, forecasted a revenue growth CAGR of between 15% and 20% “over the next several years”, as we can see on the Q421 earnings call.

We expect our long-term revenue to be between 15% and 20% CAGR over the next several years in U.S. dollar terms, of course, fueled by all 4 growth platform which are smartphone, HPC, IoT and automotive.

As such, nudging the forecast now just up to the top of the previously forecasted range isn’t a particularly drastic move, especially given the kind of growth rates they are talking about for their AI Acceleration section of their HPC segment. We next review those growth numbers, along all the other key takeaways from both the prepared remarks and Q&A session. Let’s dig in…