TSMC has released its second quarter 2024 results, and they certainly look like a bellwether for the tech industry. The company announced that its revenue from AI-related chips surpassed its revenue from smartphone chips for the first time, marking what could be a considerable shift in the company’s business priorities.
Bloomberg is reporting that for the second quarter of 2024, TSMC reported sales AI-related high-performance computing (HPC) hardware now accounts for 52% of its revenue, a first for the company. Smartphone chips are now a distant second among its top-revenue categories at just 33%, with the remaining 15% coming from IoT, automotive and “etc.”
The chips that make up the bulk of its HPC division are AI accelerators from Nvidia and AMD, Apple's M-series SoCs, and newer AI-enabled mobile chips from AMD and Qualcomm, which currently power PC Copilot+ from Microsoft.
TSMC's year-on-year profits have risen 40%, largely thanks to the rise of AI.
Credit: TSMC
According to Bloomberg, smartphone chips have been the company’s biggest source of revenue for more than a decade. The profit gap between the two divisions is expected to grow as the AI boom continues through 2025. In the last quarter alone, HPC profits from AI-related chips rose 28%, which is a surprisingly fast increase. Chairman CC Wei said that now that all of its customers are rushing to incorporate AI into their products, TSMC can barely keep up with demand.
Asked on the earnings call whether TSMC will be able to ease the queue that customers are experiencing for CoWoS (chip-on-wafer-on-substrate) products such as Nvidia and AMD accelerators, Chairman Wei said he hopes it can be resolved by 2025 or 2026. Still, right now, demand is simply too high.
“I also tried to achieve a balance between supply and demand (for CoWos), but I can't today,” Wei said, according to The Motley Fool's. transcription“Demand is very high. I had to work very hard to meet the demand of my clients. We are still increasing. I hope that sometime in 2025 or 2026 I can break even.”
The shift in its profits from phones to AI seems to indicate where the tech industry is headed. Nvidia is now better known as an AI company than for its GeForce cards, and AMD is now rumored to prioritize AI hardware sales over consumer GPUs. The company is currently preparing to launch its next-generation RDNA 4 line of graphics cards. which will reportedly be mid-range only as it wants to use its larger TSMC chips for its Instinct AI accelerators, where profit margins and demand are much higher than for its consumer products.
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