In a groundbreaking announcement, TSMC (Taiwan Semiconductor Manufacturing Company), a dominant player in the semiconductor industry and a chief supplier for tech giants like Apple and NVIDIA, has embarked on producing advanced 4-nanometer chips at its facility in Arizona, USAThis marks TSMC's first large-scale advance chip manufacturing endeavor in the United States, a move hailed as a major milestone by U.SSecretary of Commerce Gina Raimondo, who noted that many deemed it impossible just a few years ago.

TSMC's role as a critical supplier to companies like Apple, AMD, and NVIDIA places it at the forefront of the ongoing global artificial intelligence boomNotably, TSMC's stock surged nearly 90% in 2024, achieving a market capitalization that surpassed $1 trillion for the first time

The financial reports released recently indicated a staggering 57.8% year-over-year revenue increase for December 2024, coupled with a 0.8% rise from the previous monthThe fourth quarter of 2024 alone saw a 38.8% increase in revenue, surpassing expectations and emboldening investor sentiment regarding continued momentum in the AI sector through 2025.

The Production of 4-Nanometer Chips in the U.S.

During a press briefing on January 10, 2024, U.SSecretary of Commerce Gina Raimondo highlighted that TSMC began the production of 4-nanometer chips for U.Sclients in Arizona—an inaugural event in American historyShe emphasized that these chips had started production weeks prior to her announcement, reiterating its unprecedented nature.

In efforts to revitalize the American chip industry, a semiconductor manufacturing and research subsidy plan valued at $52.7 billion was approved in 2022. TSMC has been encouraged to establish wafer fabs in the U.S., alongside other leading semiconductor firms.

Currently, TSMC operates two fabs in Arizona and has committed to increasing its investment from $40 billion to $65 billion, with plans for a third fab by 2030. This investment strategy aims to secure a prominent position within the U.S

semiconductor landscape.

In November 2023, TSMC’s U.Ssubsidiary secured an allocation of $6.6 billion in federal grants to establish the facility, alongside receiving up to $5 billion in low-interest loans—indicating a robust government backing in support of domestic chip production.

The company anticipates that the first Arizona fab will begin mass production in the first half of 2025, while the second will produce state-of-the-art 2-nanometer chips by 2028. TSMC plans to leverage advanced manufacturing technologies, including the production of A16 chips within the state.

TSMC's Revenue Explosion

On January 10, 2024, TSMC released its monthly revenue report, revealing a total revenue of NT$278.16 billion (approximately $9.1 billion) for December, which represented a 0.8% month-over-month increase and a remarkable 57.8% year-on-year growth

For the entirety of 2024, TSMC's revenue is projected to be NT$2.8943 trillion, a 33.9% increase compared to 2023.

In Q4 of 2024, TSMC's overall revenue amounted to NT$868.5 billion (approximately $26.36 billion)—surpassing market expectations significantly, as prior forecasts had estimated it at NT$853.6 billion ($25.9 billion).

The robust performance of TSMC invigorates expectations for other tech giants like Google, Microsoft, and Amazon to continue substantial investments in building and upgrading data centers, driven by the accelerating evolution of artificial intelligenceRecently, Foxconn, another key AI server manufacturer, reported better-than-expected sales, while Microsoft outlined its plan to allocate $80 billion for data center investments in the current fiscal year.

As the world's largest advanced chip manufacturer, TSMC stands to benefit significantly from the global AI development race

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In 2024, TSMC's market capitalization nearly doubled, reaching approximately $1.1 trillion.

Nonetheless, there are apprehensions in the marketChallenges such as overbuilding, power shortages, and a lack of breakthrough AI applications might pose threats to the further advancement of AI technologiesAdditionally, amidst the growing geopolitical uncertainties and the wider tech market, TSMC could face some turbulence; nevertheless, its gross margin is expected to hit record highs.

Morgan Stanley projects a decline of 5% in TSMC's first-quarter revenue due to seasonal factors impacting iPhone productionStill, the overall revenue outlook for the year is positive, though growth may fall below 20%. Analyst Charlie Chan noted TSMC's conservative approach to performance guidance in the past.

TSMC is scheduled to disclose a complete earnings report for Q4 on January 16, where it will provide updated forecasts for the current quarter and year

Industry analyst Charles Shum indicated that TSMC’s gross margin might escalate to a two-year peak of 58%, or possibly higherFour focus areas will be under scrutiny in the upcoming earnings call: Firstly, the revenues and progress of CoWoS advanced packaging; secondly, the production ramp-up at the Arizona fabs; thirdly, the weakening demand for older process nodes (such as 7nm and 16nm) which could exert profit pressure; and lastly, the capital expenditure plan for 2025, reflective of TSMC’s confidence in securing next-generation 2nm processes.

Recently, analysts at Citigroup projected that with NVIDIA driving demand, TSMC's AI-related revenue could significantly increase by 2025. NVIDIA might even surpass Apple to become TSMC's largest client, potentially doubling revenue contributions to 20%.

According to Citigroup analysts, besides NVIDIA, the surging demand for application-specific integrated circuits (ASICs) tailored for AI within the next two to three years will further underpin TSMC's revenue growth