Key Nvidia Corp (NASDAQ:NVDA) supplier Taiwan Semiconductor Manufacturing Co (NYSE:TSM) is witnessing a surge in orders from significant clients, Apple Inc (NASDAQ:AAPL), Intel Corp (NASDAQ:INTC), and Advanced Micro Devices, Inc (NASDAQ:AMD) for its cutting-edge 3nm chips.
Apple was initially the sole customer for these chips, as TSMC gradually increased its production capacity through late 2022 and into the fourth quarter of 2023.
Now, the contribution of 3nm chips to TSMC’s revenue will likely exceed 20% this year, Technode reports.
Also Read:Semiconductor Chip Inflation Risk – Taiwan Semi to Face Up to 25% Electricity Tariff Hike in Taiwan
TSMC has captured over 90% of the global AI chip foundry orders. The high demand for AI chips and the utilization of advanced processes will likely significantly enhance TSMC’s performance, potentially increasing its revenue by 24% to 26% year-on-year in 2024.
The iPhone 16 series will incorporate the A18 series processor, and the new Mac will use the M4 series processor, which are 3nm chips set to begin production by TSMC in the second quarter of this year.
Furthermore, Intel is poised to commence mass production of its Lunar Lake CPUs, GPUs, and high-speed I/O chips using TSMC’s 3nm process in the second quarter of 2024.
AMD is also gearing up to launch its new Zen 5 architecture platform, aimed at boosting AI applications and utilizing TSMC’s 3nm process, with a launch expected in the second half of 2024.
The demand for TSMC’s 3nm chips soared in the last quarter of the previous year, primarily due to orders for the 3nm A17 Pro processor used in the Apple iPhone 15 series, pushing the revenue share of 3nm chips to about 15%.
Recent reports indicated that unexpected snags hit TSMC in its efforts to strengthen the American semiconductor supply chain, as shown by construction delays affecting critical suppliers in Arizona.
The delays stem from rising construction costs, labor shortages, and various operational issues, further complicated by the specific regulatory, environmental, and safety challenges associated with building chemical plants.
As a result, TSMC plans to build factories for 2-nanometer chips in Hsinchu and Kaohsiung cities in Taiwan. Moreover, TSMC is evaluating the establishment of a second facility in Kumamoto, Japan, with a potential investment of $13.5 billion.
The stock has gained over 53% in the last 12 months. Investors can gain exposure to the stock via VanEck Semiconductor ETF (NASDAQ:SMH) and IShares Semiconductor ETF (NASDAQ:SOXX).
Price Action: TSM shares traded higher by 0.73% at $139.86 premarket on the last check Wednesday.
Also Read:Nvidia’s Blackwell GPUs Spark Analyst Excitement: Predicted to Drive Next Wave of AI Innovation
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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