🧠 Food for thought

Implications, context, and why it matters.

The AI boom drives Taiwan Semiconductor Manufacturing Co.’s growth

• Revenue is climbing mainly because AI demand is rising fast 1.
• Sales from AI processors, narrowly defined as graphics processing units (GPUs), AI accelerators, and central processing units (CPUs) used for AI training and inference, are forecast to more than double in 2024 and reach a low-teens share of total revenue 2.
• Leading-edge manufacturing underpins that momentum, with 3-nanometer, 5-nanometer, and 7-nanometer at 9%, 37%, and 19% of first-quarter wafer revenue, while advanced technologies (7-nanometer and below) total 65% 1.
• Demand looks durable as 2-nanometer is expected to get more new tape-outs, the stage when a chip design is finalized for manufacturing, in its first two years than 3-nanometer and 5-nanometer did in their first two years 1.

TSMC’s global buildout raises costs across tech

• Cash from recent performance is backing overseas capacity, with three chip plants slated for Arizona, a first chip plant in Japan that held an opening ceremony in February plus a second specialty chip plant there, and a specialty technology chip plant planned for Dresden, Germany 1.
• The company says a more fragmented globalization environment will push higher costs onto customers throughout the tech industry 1.
• Power bills are already adding pressure after a 17% electricity price increase last year on April 1, followed by another 25% increase starting April 1, which TSMC expects to cut second-quarter gross margin by 70 to 80 basis points and reduce gross margin by 60 to 70 basis points in the second half of 2024 1.
• In response, TSMC says pricing will account for the value of geographic flexibility and customers will cover part of the extra cost tied to overseas chip plants 1.