Our digitally connected world runs on computers, and computers run on semiconductors. Thanks to these magical, tiny microchips, computers are getting smaller, smarter, and faster. This progress has enabled everything to become a computer.
Your mobile phone is a computer, so is your watch, car, and even some fridges and toasters are computers now!
And no company is manufacturing more semiconductor chips today than Taiwan Semiconductor Manufacturing Company! TSM 0.00%↑
TSMC’s obsessive focus on manufacturing excellence has made them the chip foundry of choice for the most known technology companies of today, such as Apple, Microsoft, Nvidia, AMD, Google, and Amazon.
Semiconductor chips have become the bedrock of our modern digital economies!
It is almost certain that the device you are reading this article from contains semiconductor chips made by TSMC!
Operational excellence has resulted in financial excellence, with sales and profits more than doubling since 2020!
In this article, I will present the Investment Case of TSMC, which largely rests on their strong foundry market share, and the growth of the semiconductor industry fueled by IoT, 5G, automotive, and AI.
Additionally, I will briefly discuss the China vs Taiwan risk!
1. Market Share
2. Global Semiconductor Industry Growth
3. High-Performance Computing and AI
4. Competitive Advantages
5. China vs Taiwan
6. Valuation
7. Conclusion
1. Market Share
TSMC makes money by manufacturing chips according to the design and specifications of its clients. Unlike Intel, Nvidia, Qualcomm, or Samsung, TSMC doesn’t design the chips, their sole focus is manufacturing semiconductors as efficiently and cheaply as possible, while meeting the strict quality requirements of their picky clientele.
While TSMC has been the leading independent pure-play chip contract manufacturer since the early 2000s, in the 2020s, its market share has exploded.
According to the above graph from Counterpoint Research, in Q4 of 2024, TMSC had a mind-boggling 67% market share!
This is a huge increase from the approximately 52% market share it had in 2019!