(Bloomberg)

Taiwan Semiconductor Manufacturing Co.’s introduction of a new chipmaking technology was a huge boost to the company amid a weakening global environment.

It’s 7-nanometer node, which measures the size of connections inside a chip, accounted for 11 percent of revenue during the third quarter, from zero in the previous three months.

That works out at around $934 million, surpassing revenue from its previous-generation 10-nanometer technology. In fact, 10-nanometer revenue dropped by half, indicating some cannibalization.

Uptake for 7-nanometer is faster than for previous chipmaking processes, CEO C.C. Wei told investors Thursday. That node will account for 20 percent of revenue this quarter, according to CFO Lora Ho. One downside is to profitability, as the high costs of a new manufacturing technology generally hit gross margin.

TSMC doesn’t like to talk about clients, but Apple Inc. is a primary customer. Other names include Qualcomm Inc., with the Taiwanese chipmaker pointing to demand for new smartphones as a key driver.

This quick adoption of its newer technology lends support to TSMC’s strategy of spending big to remain at the bleeding edge, even when that means annual capex budgets surpass $10 billion. But investors will also need to brace for a bit of margin pain.


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Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.

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