Taiwan Semiconductor Manufacturing Company (TSMC) has experienced a significant increase in super urgent orders (SHR) from Chinese customers, as reported by Chinese media outlet Jiwei. Market sources indicate that these customers are paying up to 40% extra for expedited services, which has bolstered TSMC’s gross profit margins in the second quarter and improved financial forecasts for the third quarter.
The uptick in orders comes as Chinese chip manufacturers rush to secure supplies amid uncertainties surrounding the upcoming U.S. presidential election and its potential impact on U.S.-China relations. This strategic move has allowed TSMC to maintain robust gross profit and operating margins, with revenue projections for the third quarter and the entire year expected to exceed previous expectations.
Data from TSMC’s recent legal briefings reveal that the proportion of sales from Chinese customer orders rose from 9% in the first quarter of 2024 to 16% in the second quarter. Despite these gains, TSMC has refrained from commenting on claims that Chinese customers are increasing orders due to external uncertainties.
The heightened demand for TSMC’s advanced 3nm and 4/5nm processes has prompted the company to raise prices for these technologies earlier in 2024. As a result, order visibility for these processes has extended into 2025. TSMC plans to expand its monthly production capacity for the 3nm process to 130,000 pieces and the 4/5nm process to 160,000 to 170,000 pieces to meet this strong demand.
Sources emphasize that TSMC’s main Chinese customers, including Bitmain, Alibaba T-Head, and ZTE Microelectronics Technology Company, are eager to stockpile chips amidst rising U.S.-China tensions and the unpredictable political landscape. This proactive approach underscores the strategic importance of securing semiconductor supplies in a volatile global market.
