TSMC (NYSE: TSM) Beats On Earnings, Apple Chips Move Into Production

Today's TSM earnings have come in above expectation, with the consensus EPS of NT$11.52 being surpassed by an impressive margin, at NT$12.54. The firm also delivered on revenue, with the actuals of NT$759.69 billion a beat on the expected NT$750.21B.

This marks the third consecutive quarter where TSMC has beat on both top and bottom lines and is expected to have positive implications when markets open according to some of the overnight pricing.

Adjusted into USD, third quarter revenue came in at $23.50 billion, an increase of 36.0% year-over-year and up 12.9% from the most recent quarter. Operationally, 5-nanometer accounted for the highest proportion of wafer revenue in the Q at 32%, with advanced technologies (7-nanomenter and more advanced tech) bringing in 69% of total wafer revenue.

The landscape of the semiconductor industry in the United States has recently experienced a significant development. Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), the world's leading chipmaker, has initiated the production of A16 chips for tech giant Apple Inc. at its newly established facility in Phoenix, Arizona.

This strategic move is part of the larger U.S. initiative to revitalise domestic semiconductor production and reduce reliance on overseas supply chains.

Initial reports indicate that while the chip production is underway, the facility is not yet operating at full capacity. The output is currently on a smaller scale, but it is a noteworthy start to what is expected to be a substantial contribution to the U.S. semiconductor sector. Two years ago, Apple CEO Tim Cook announced that the company would be the main customer for TSMC’s Arizona plant, marking a significant shift towards using American-manufactured chips for the first time in nearly a decade.

Although TSMC's venture into Arizona has encountered hurdles, including construction setbacks and workforce training issues, the project is advancing with expectations to be fully operational by the first half of 2025. The Biden-Harris administration has set clear goals to bolster U.S. chip production capabilities, and TSMC's efforts align closely with these objectives.

Analysts perceive TSMC's foray into U.S. chip production as an affirmative action with the potential for job creation and long-term economic benefits. Apple's decision to forego TSMC’s 2nm technology for the iPhone 17 series in favor of a refined 3nm chip reflects the ongoing tactical decisions in semiconductor manufacturing, underscoring the continuous evolution and innovation within the industry.

TSMC has demonstrated a robust financial performance, the latest data indicating a month-over-month increase in September revenues by 0.4% and a significant year-over-year boost of 39.6%. This fiscal health suggests a solid capacity for the company to scale up its operations and continue investing in new facilities, such as the one in Arizona.

The commencement of chip production by TSMC in the United States is an encouraging step towards securing a stronger and more autonomous semiconductor industry. It represents not just a milestone for national manufacturing capabilities but also an opportunity to invigorate the economy through technological advancement and job creation.