How much revenue has Nvidia contributed to TSMC?

How much revenue has Nvidia contributed to TSMC?

In 2023, Nvidia paid TSMC $7.73 billion.

Despite TSMC not disclosing details of its business with customers, it is required by U.S. law to disclose if a customer accounts for more than 10% of its revenue. It turns out that, according to estimates by financial analyst Dan Nystedt, who specializes in semiconductor companies, Nvidia accounted for 11% of TSMC's revenue in 2023.

Last year, Apple Inc. (referred to as "Customer A" by TSMC in its filings with the U.S. Securities and Exchange Commission) accounted for 25% of TSMC's revenue and paid TSMC $17.52 billion. Meanwhile, Nvidia (which Nystedt believes was designated as Customer B in the filings) paid TSMC $7.73 billion, representing 11% of TSMC's net revenue in 2023.

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"In 2023, the top 10 customers of TSMC accounted for 91% of its revenue, up from 82% in 2022," Nysted wrote in a post on X: "These companies include MediaTek, AMD, Qualcomm, Broadcom, Sony, and Marvell."

For many years, Apple has been TSMC's number one customer, and considering the volume, Apple is likely to remain TSMC's top customer for many years to come. However, no other customer has accounted for more than 10% of TSMC's revenue for a long time. Although companies like AMD, MediaTek, and Qualcomm have been increasing their orders with TSMC in recent years, the fervor for artificial intelligence has pushed the demand for Nvidia's H100 and A100 processors to unprecedented levels, which is why it increased its orders with TSMC, the world's largest wafer foundry. In fact, during the cryptocurrency mining boom of 2021-2022, Nvidia also prepaid for TSMC's capacity.

It should be noted that complex AI processors like Nvidia's A100 and H100 are manufactured by TSMC and packaged by the company using CoWoS technology, for which Nvidia pays TSMC for the chips and advanced packaging services.

With the increasing demand for AI processors, Nvidia's share of TSMC's revenue may increase in 2024. The company has already booked chip and CoWoS capacity to ensure a steady supply of its premium processors for AI.This year, it remains to be seen whether AMD's share of TSMC's revenue will exceed 10%. The company sells a large number of EPYC processors aimed at data centers, and there is also a high market demand for its Instinct MI300 series products used for AI and HPC. Therefore, AMD's share of TSMC's revenue may increase.

TSMC Becomes the World's Most Profitable Semiconductor Manufacturer

TSMC's financial report for 2023 shows that the company's annual revenue was $69.298 billion, with New Taiwan Dollar (NTD) revenue reaching 2,161.74 billion, a year-on-year decrease of 4.5%, but better than expected. The gross margin was 54.4%, down 5.2% year-on-year, the operating profit margin was 42.6%, down 6.9% year-on-year, and the net profit after taxes was $31.389 billion, approximately NTD 979.171 billion, down 14.4% year-on-year, with earnings per share at NTD 32.34.

Financial analyst Dan Nystedt tweeted that, based on 2023 revenue, TSMC became the world's largest semiconductor manufacturer for the first time. The report indicates that TSMC's 2023 revenue reached $69.3 billion, surpassing Intel's $54.23 billion and Samsung's $50.99 billion.

Associate Professor Shen Rongqin from York University in Canada stated that TSMC, established in 1987, took 36 years to become the world's largest semiconductor manufacturer, not just the largest wafer foundry manufacturer.

According to TSMC's financial forecast released at the January legal meeting this year, the company expects its first-quarter revenue to be between $18 billion and $18.8 billion. Based on an exchange rate of 31.1 New Taiwan Dollars to the US dollar, this is approximately between NTD 559.8 billion and NTD 584.68 billion, a sequential decrease of about 6.3%. The gross margin is estimated to be between 52% and 54%, consistent with the fourth quarter of last year, and the operating margin is expected to be between 40% and 42%.

Looking forward to this year's performance, TSMC President C.C. Wei stated that although the global economy still has uncertainties that may put pressure on consumer sentiment and market demand, with the semiconductor inventory returning to a healthy level, the overall semiconductor industry value (excluding memory) is expected to grow by 10% this year. The wafer manufacturing industry is expected to grow by about 20% annually. It is estimated that, driven by AI and high-performance computing (HPC) demand, TSMC's annual dollar revenue could increase by 21% to 25%.

From C.C. Wei's judgment, it can be seen that TSMC has focused this year's revenue on AI and HPC, while the automotive chip foundry business, which has previously saved the performance of several semiconductor giants during the semiconductor cycle, has not been mentioned.

In terms of revenue structure, the proportion of IoT and automotive businesses in TSMC's total revenue is also declining. In the fourth quarter of 2023, the automotive business accounted for 5% of TSMC's total revenue, remaining the same quarter-on-quarter, but down 1 percentage point year-on-year. The IoT business accounted for 5% of the total revenue in the fourth quarter, down 4 percentage points quarter-on-quarter, and down 3 percentage points year-on-year.Counterpoint analysis suggests that the automotive and industrial applications underwent inventory adjustments in the third quarter of 2023, with the expectation that this adjustment period will continue into the first quarter of 2024. The challenges TSMC will face in 2024 include slow growth in non-AI and HPC sectors as well as weak demand from the automotive industry.

As for artificial intelligence, news indicates that TSMC is actively increasing its capacity plans for system-on-integrated-circuit (SoIC) chips, aiming to ramp up monthly production to 5,000-6,000 units by the end of 2024 to meet the robust future demand for AI and HPC. Currently, AMD and Apple are very interested in TSMC's SoIC products; the former being the inaugural customer for TSMC's SoIC, while the latter plans to integrate SoIC chips with thermoplastic carbon fiber board composite molding technology, intending to apply it in products such as Macs and iPads.

Counterpoint Research's Associate Director, Brady Wang, analyzes that TSMC's strong growth in 3nm process technology and AI applications positions it as a major beneficiary in the AI semiconductor field. The market is expected to see a robust increase in AI applications in 2024, highlighting TSMC's key role in providing advanced 5nm and 3nm technologies to enhance artificial intelligence computing devices, thereby reinforcing its dominant position and the best industry standing in this domain.

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