(Yicai) July 18 -- Taiwan Semiconductor Manufacturing Corporation reported a 36 percent increase in second-quarter profit from a year ago thanks to surging demand for chips used in artificial intelligence. The world’s biggest contract chipmaker also raised its annual revenue forecast.

Net profit was TWD247.9 billion (USD7.6 billion) in the three months ended June 30, the Hsinchu-based firm’s earnings report showed today. Revenue was TWD673.51 billion (USD20.82 billion), up 40 percent annually and 13.6 percent on the prior quarter.

In US dollar terms, revenue jumped 33 percent year on year to USD20.8 billion. Gross margin for the quarter was 53.2 percent, net profit margin was 36.8 percent, and operating margin was 42.5 percent.

Business was supported by strong demand for TSMC’s industry-leading 3-nanometer and 5-nanometer technologies, though that was offset by seasonality in the smartphone market, Chairman and Chief Executive C. C. Wei said on an earnings conference call.

Shipments of 3-nm chips accounted for 15 percent of TSMC’s total wafer revenue in the quarter, while 5-nm and 7-nm chips made up 35 percent and 17 percent, respectively. Advanced technologies, defined as 7-nm and higher, constituted 67 percent.

Wei also said the company was raising its full-year revenue guidance, expecting an increase of a little over 25 percent in US dollar terms.

TSMC expects sales of between USD22.4 billion and USD23.2 billion for this quarter and predicts a gross margin of between 53.5 percent and 55.5 percent and an operating margin from 42.5 percent to 44.5 percent.

The company has narrowed the range its annual capital budget forecast to be between USD30 billion and USD32 billion, compared with an earlier prediction of USD28 billion to USD32 billion, said Chief Financial Officer Wendell Huang.

Shares of TSMC [TPE: 2330] closed down 2.4 percent at TWD1,005 (USD30.78) each in Taipei today, after its New York-listed stock [NYSE: TSM] tumbled 7.9 percent to USD171.20 yesterday.

Editor: Kim Taylor