Why did TSMC's operating expenses rise sharply in 2024?

TSMC's operating expenses rose sharply in 2024 due to several key factors:

1. **Capital Expenditure on Advanced Technologies**: TSMC invested heavily in advanced process technologies, with capital expenditures projected to exceed $30 billion for the year. This investment is a key driver of increased operating expenses as the company expands its production capabilities.
2. **AI-Driven Growth**: The company's AI-related demand has been strong, with server AI processors expected to triple and comprise a mid-teens percentage of total revenue in 2024. This growth area requires significant investment in research and development, leading to higher operating expenses.
3. **Global Expansion**: TSMC is expanding its global manufacturing footprint, with construction at its fab plant in Germany expected to begin in the fourth quarter of 2024. This expansion includes the establishment of new facilities in Arizona and Japan, which incurs significant upfront costs and contributes to higher operating expenses.
4. **Increased Production Costs**: The company has faced challenges related to rising electricity costs and potential 2-3% gross margin dilution due to overseas expansion. These increased production costs are reflected in the operating expenses.

In summary, TSMC's operating expenses rose sharply in 2024 due to strategic investments in advanced technologies, the growth of the AI segment, global expansion efforts, and increased production costs. These factors collectively contribute to the company's ongoing investment cycle and its position for future growth.