Nvidia Supplier TSMC Leads Charge in AI Chip Boom Despite Taiwan's Tech Sector Sales Slump

Key Nvidia Corp NVDA and Apple Inc AAPL supplier Taiwan Semiconductor Manufacturing Co TSM and other leading chipmakers in Taiwan experienced a buoyant February, riding the wave of robust demand for artificial intelligence (AI)–related products, even as the broader consumer electronics sector faced declining sales. 

This contrast highlighted Taiwan’s tech industry’s varied performance during the month. 

The overall sales for Taiwan’s principal tech manufacturers dropped by 5.9% year-on-year in February, marking the third month of consecutive negative growth. 

However, a surge in AI-related sales helped mitigate the decline from January’s 8.3% drop, the Nikkei Asia reports.

Also Read: Powerchip Semiconductor Takes on Taiwan Semi With Ambitious Japan Plant Amid Engineer Shortage

The combined February sales of the island’s 19 most prominent tech companies amounted to 958.2 billion Taiwan dollars ($30.4 billion), as calculated by Nikkei. 

The sales downturn was partly due to the reduced number of business days, influenced by this year’s Lunar New Year holiday timing. 

In contrast to electronics companies, semiconductor firms mainly reported sales increases, benefiting from continuous factory operations. TSMC, the globe’s leading contract chipmaker, registered an 11.3% year-on-year sales increase, setting a new record for February, driven primarily by strong sales in advanced AI-related products, especially to crucial client Nvidia.

MediaTek and Nanya Technology also reported significant sales upticks, by 27% and 50.6%, respectively, fueled by renewed demand from Chinese smartphone makers. 

Conversely, electronics manufacturing services like Foxconn and Pegatron, which are involved in Apple Inc AAPL iPhone production, observed sales declines of 12.3% and 28.1%, respectively. 

Similarly, major PC manufacturers like Compal Electronics faced a 14.1% sales reduction, while Quanta Computer managed a slight sales increase of 1.1%.

TSMC has significantly expanded its global footprint by inaugurating its first chip manufacturing facility in Kumamoto, Japan, targeting the diversification of supply chains against intensifying trade tensions between the U.S. and China.

Additionally, TSMC is broadening its international reach with an investment of $40 billion in Arizona, U.S., where it plans to establish two manufacturing plants to cater to the semiconductor demand in the United States. 

The key chipmaker will reportedly win up to $5 billion in grants from the U.S. government for building the facility in Arizona.

Investors can gain exposure to TSMC via IShares Semiconductor ETF SOXX and VanEck Semiconductor ETF SMH.

Price Action: TSM shares are trading lower by 1.89% to $141.67 on the last check Wednesday.

Also Read: Apple and TSMC Collaborate on Next-Gen 2nm Chips, Eyeing 2025 Production Start: Report

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

Photo via Wikimedia Commons