Despite geopolitical concerns, TSMC forges ahead with Arizona semiconductor fabs
Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) increased its revenue expectations amid strong demand for chips used for artificial intelligence — without changes to its current plans for Arizona and other overseas factories.
C.C. Wei, chairman and chief executive of TSMC, told investors and analysts during a July 18 earnings call that the company will continue to expand in Arizona as planned, as well as in Japan and potentially Europe despite geopolitical concerns that arose this week from comments by former President Donald Trump about Taiwan that prompted a sharp drop in its shares on Wednesday.
Trump, now the Republican presidential candidate, told Bloomberg in June that Taiwan should pay for the defense provided by the United States and also claimed that Taiwan took “100% of our chips business.”
In response to a question during the earnings call, Wei said the company would not consider a joint venture ownership with the United States for its Arizona fabrication facilities, or fabs, and would continue its current strategy for expanding outside of Taiwan.
TSMC is planning a $65 billion investment across at least three fabs in Phoenix and is on track to start operations at its first factory in Arizona by the first half of 2025. Engineering wafer production is also already underway at its first factory, which will produce 4-nanometer FinFET process technologies.
Second TSMC Arizona factory targets 2028 startup date
Its second Arizona fab, set to produce 2- and 3-nanometer process technologies, is expected to start operations in 2028 followed by production at its third fab by the end of the decade. The company plans to employ more than 6,000 people and as of April had hired 2,200 workers.
TSMC beat Wall Street expectations of $20.23 billion revenue in the second quarter with $20.82 billion in revenue, a 32.8% increase year-over-year and a 10.3% increase from the previous quarter. TSMC had previously predicted its Q2 revenue would reach $19.6 billion to $20.4 billion.
“Our business in the second quarter was supported by strong demand for our industry-leading 3nm and 5nm technologies, partially offset by continued smartphone seasonality,” said Wendell Huang, senior VP and chief financial officer of TSMC, in a statement.
After taking a hit on Wednesday and losing more than 7% of its value, TSMC shares held their own in trading Thursday, closing basically flat, gaining 67 cents to reach $171.87.
Huang said the company expects their business moving into Q3 to be supported by “strong smartphone and AI-related demand for our leading-edge process technologies.” High-performance computing and smartphones made up most of TSMC’s revenue in the second quarter.
TSMC expects its third quarter revenue to range between $22.4 billion and $23.2 billion and its gross profit margin to be between 53.5% and 55.5%.
During Q2, the company earned $1.48 per share versus Wall Street’s expectation of $1.41.
Shares for some of the biggest semiconductor firms took a hit this week, the New York Times reported. This was a result of the Biden Administration considering increased trade restrictions on companies that are sending semiconductor equipment to China, Bloomberg reported.
The U.S. Department of Commerce on April 8 entered a nonbinding preliminary agreement with TSMC for a CHIPS Act award package with $6.6 billion in grants and up to $5 billion in loans.