- TSMC CEO C.C. Wei forecasts AI chip supply will not meet demand until 2025 or 2026.
- Former chairman Mark Liu’s 2023 prediction of resolving the shortage in 2024 has been revised.
- CoWoS packaging capacity remains a bottleneck, though it has been more than doubled with plans for further increases.
- TSMC is expanding facilities in Arizona and Kumamoto, Japan, despite recent US political criticism.
- TSMC’s stock fell nearly 8% following US presidential candidate Donald Trump’s comments about Taiwan.
- The company’s Q2 2024 revenue rose 40.1% year-on-year, with strong margins reported.
Main AI News:
Taiwan Semiconductor Manufacturing Company (TSMC) CEO C.C. Wei has projected that supply for advanced AI chips will not meet demand until 2025 or 2026. During the Q2 2024 earnings call, Wei acknowledged the high customer demand and the ongoing efforts to enhance supply. He expressed hope that equilibrium might be achieved by 2025 or 2026.
These remarks correct previous predictions made by former chairman Mark Liu in September 2023, who had anticipated that the AI chip shortage would end in 2024. Liu had attributed the shortage to packaging issues rather than the chips themselves.
Wei confirmed that CoWoS packaging capacity, which connects processors to high-bandwidth memory (HBM), remains a constraint. However, TSMC has more than doubled this capacity from last year and plans to double it again in the coming year.
In response to the shortage, TSMC is collaborating with international partners to boost supply and support clients. The company is expanding its manufacturing facilities in Arizona and Kumamoto, Japan, with funding from partners and government subsidies. Despite recent critical remarks by US Republican presidential candidate Donald Trump regarding Taiwan’s contributions, Wei assured that TSMC’s expansion plans remain unchanged.
Trump’s comments, which suggested Taiwan should financially contribute to US defense and implied TSMC’s dominance in the chip market, negatively impacted TSMC’s stock, which fell nearly eight percent on the NYSE. On the earnings call, Morgan Stanley’s Charlie Chan raised concerns about the geopolitical risks and potential US tariffs on chips. Wei addressed these concerns by confirming that TSMC’s expansion strategy remains consistent and that any tariffs would typically be the responsibility of customers.
TSMC is set to begin mass production of its advanced 2 nm chip in the latter half of 2025, with the A16 chip expected to follow in 2026. The company’s second-quarter revenue rose 40.1% year-on-year to NT$673.51 billion (approximately $20.82 billion), surpassing estimates. Gross margin for the quarter was 53.2%, operating margin 42.5%, and net profit margin 36.8%.
Conclusion:
TSMC’s extended timeline for resolving the AI chip shortage highlights ongoing supply chain constraints and geopolitical tensions impacting the semiconductor market. The company’s proactive expansion efforts and strategic partnerships are essential to meeting future demand. However, external political factors, such as comments from US political figures, may influence investor sentiment and stock performance. TSMC’s strong financial performance underscores its resilience and capacity to navigate these challenges, positioning itself to remain a pivotal player in the semiconductor industry.
