This company posted better-than-expected quarterly revenues, which may deter China and the United States from starting WWIII.
Barring the start of a world war, the economic performance of TSMC could be a serious indicator of a prosperous 2024 for financial markets. Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest producer of chips, manufacturing over 90% of the most advanced semiconductors on the market.
On Thursday, TSMC posted better-than-expected quarterly revenues. In the last quarter of 2023, the Taiwanese chipmaker earned 625.53 New Taiwanese dollars ($19.62 billion)) instead of NT$618.31 billion expected. The company’s net income amounted to NT$238.71 billion ($7.6 billion), up from NT$225.22 predicted.
Net revenues decreased 1.5% year-on-year, while net income fell by 19.3% over the same period. Compared to the previous quarter, however, revenues increased by a massive 14.4%.
TMSC’s biggest clients are Apple and NVIDIA, the largest chip designers in the world. In 2023, Apple released a new MacBook Pro with the M3 chip, the latest evolution of the company’s computing design.
NVIDIA is also demanding increasingly more advanced chips, positioning itself as the leading chip-making company for artificial intelligence. Market analysts don’t forecast any loss in interest for NVIDIA chips any time soon.
According to analysts, US companies are running out of chip stockpiles. Demand for semiconductors should therefore skyrocket in 2024, especially in the face of a likely US soft landing.
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Tension with China
The Taiwanese semiconductor industry continues to thrive on the backdrop of geopolitical tensions between the world’s most powerful nations: the United States and China.
China considers Taiwan a rebel province, and the recent victory of Lai Ching-te as Taiwanese president could worsen relations between the two nations. Lai leads the DPP, a pro-independence party that refuses unification with China. On the other hand, Lai is unlikely to reach a majority in the parliament, meaning he will likely have to compromise with other, more pro-China parties.
Beijing is aware of the strategic importance of Taiwan’s chips. China is a crucial client of TSMC, and all its attempts at creating its own semiconductor industry failed.
Meanwhile, the United States is encouraging chip designers to invest in microchip factories on the American mainland. The US is considered the most important Taiwanese ally, but whether they would defend the island in case of Chinese aggression remains unclear.
The November US elections will also shape the future of Taiwan and its chips. Republican candidate Donald Trump declined to comment on whether he would defend Taiwan. Trump is notoriously isolationist when it comes to foreign wars.
The current success of TSMC could be temporary. The company is thriving at a very dangerous time.
