TSMC Business Trends and Industry Impact

TSMC's revenue has been on a steady rise, increasing from $10.3 billion in 2008 to $43.8 billion in 2020.

The company's market share has also expanded, reaching 50.3% of the global semiconductor market in 2020.

TSMC's high production capacity utilization rate of 96.6% in 2020 allowed it to meet the increasing demand for semiconductors.

The company's significant investments in research and development have led to the development of new technologies and manufacturing processes.

TSMC's business model has been successful in attracting major clients, including Apple, Qualcomm, and Huawei.

TSMC's ability to meet the increasing demand for semiconductors has had a significant impact on the industry, with many companies relying on its production capacity.

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TSMC's business is largely driven by demand from major smartphone chip companies, with Qualcomm, Mediatek, and Apple being key customers.

The company's revenue growth is closely tied to the semiconductor industry's cyclical dynamics, with fluctuations in earnings and revenues over a few-year cycle. TSMC's production capacity must keep pace with strong customer demand during upturns, but excess capacity can become a problem during downturns.

TSMC's financial results tend to be seasonal, with a peak in Q3 and a low in Q1, and the company has generally seen revenue growth in recent years, with a 28% increase in 2014 over the previous year.

Here are the key regions that drive TSMC's sales:

TSMC's ownership structure is a mix of public and institutional investors. Around 56 percent of shares are held by the general public.

Institutional investors hold around 38 percent of shares. This includes large entities like pension funds and investment companies.

The largest shareholders of TSMC include the National Development Fund, Executive Yuan, with 6.38 percent of shares. BlackRock holds 5.09 percent of shares.

Other notable shareholders include Capital Research and Management Company, Government of Singapore Investment Corporation, and Norges Bank.

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TSMC's business trends are closely tied to the semiconductor industry, which is known for its cyclical nature. This means that the company's financial results tend to fluctuate with a cycle time of a few years.

The company's sales by region in 2024 show that the United States accounts for 68.8% of its business, followed by China at 11.5%. Taiwan and Japan also have significant shares, while EMEA and other regions have smaller portions.

TSMC's revenue has been steadily increasing over the years, with a notable jump from 2020 to 2021. In 2020, revenue was NT$1.3 trillion, and by 2021, it had grown to NT$1.5 trillion.

The company's production capacity is a major concern, as it must balance meeting strong customer demand during upturns with avoiding excess capacity during downturns. This is particularly challenging given the high fixed costs associated with its manufacturing facilities.

TSMC's revenue growth is largely driven by demand for its 20 nm process, 16 nm FinFET process technology, and 28 nm technology. The company has been able to maintain a strong market position, with a 28% revenue growth in 2014.

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TSMC has a significant presence in various locations around the world. The company has multiple fabrication facilities, or "fabs", in Taiwan, China, the United States, and Japan.

TSMC has a total of 23 fabs, including 20 in Taiwan, 2 in China, and 1 in the United States. The company's fabs are located in Hsinchu, Shanhua District, Taichung, and other areas in Taiwan. In China, TSMC has fabs in Shanghai and Nanjing.

One of TSMC's largest fabs is Fab 12A, located in Hsinchu, which produces 300mm wafers. The fab has multiple phases, with phases 1, 2, 4-7 operational, phase 8 under construction, and phase 9 planned.

TSMC also has several backend fabs, which are used for manufacturing and packaging semiconductor components. These fabs are located in Hsinchu, Shanhua District, Longtan District, Taoyuan, and Taichung.

Here is a list of some of TSMC's fabrication facilities:

These are just a few examples of TSMC's extensive network of fabrication facilities. The company's global presence and advanced manufacturing capabilities enable it to produce high-quality semiconductor components for a wide range of applications.

TSMC is on track to start mass producing 2nm chips in Q4 this year. This is according to a new report from DigiTimes, which claims that TSMC has resolved the yield issues that were initially reported.

The production will take place at TSMC's Baoshan and Kaohsiung plants in Taiwan, with a combined monthly wafer output of 45,000 to 50,000 units by the end of this year. This number is expected to double in 2026.

TSMC's 2nm chips will be used by several major customers, including Apple, AMD, Qualcomm, MediaTek, Broadcom, and Intel. Apple has reportedly secured 50% of all orders for the 2nm chips.

The 2nm process is expected to offer performance gains of 10-15% over Apple's 3nm chips, which will debut on the iPhone 18 series.

TSMC's N7+ is the first commercially available extreme-ultraviolet lithographic process in the semiconductor industry, offering a 15-20 percent higher transistor density and 10 percent reduction in power consumption than previous technology.

This process uses ultraviolet patterning and enables more acute circuits to be implemented on the silicon. TSMC's N5 iteration doubles transistor density and improves performance by an additional 15 percent.

TSMC has silicon lithography on node sizes ranging from 0.13 μm to 3 nm on 300 mm wafers. Here are some of the node sizes and their corresponding options:

TSMC offers design for manufacturing (DFM) customer services to help with the production process.

TSMC has benefited from regulatory and geopolitical tailwinds, particularly with the U.S.-China trade war creating a dual-layered supply chain.

TSMC's U.S. expansion aligns with the Biden and Trump administrations' reshoring agendas, making it a geopolitical favorite.

The company's partnerships with Foxconn and Wistron in Texas further cement its role in U.S. AI infrastructure.

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In 2019, TSMC was sued by GlobalFoundries over patent infringement claims. TSMC was accused of infringing 16 of GlobalFoundries' patents related to their 7 nm, 10 nm, 12 nm, 16 nm, and 28 nm nodes.

The dispute involved multiple countries, with lawsuits filed in the US, Germany, and Singapore. TSMC confidently denied the allegations, stating they were baseless.

In response, TSMC filed their own patent infringement lawsuits against GlobalFoundries in the US, Germany, and Singapore. They claimed that GlobalFoundries' 12 nm, 14 nm, 22 nm, 28 nm, and 40 nm nodes infringed 25 of their patents.

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After several months, TSMC and GlobalFoundries reached a resolution to the dispute. They agreed to a life-of-patents cross-license for all existing semiconductor patents and new patents for the next 10 years.

TSMC's ranking in the MEMS field is also worth noting. In 2019, they were ranked fourth, behind leader Silex Microsystems. Two years later, in 2021, they jumped to third place in the MEMS field.

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TSMC's business model is inherently diversified, serving a broad client base including various technology companies. This diversification helps the company navigate complex geopolitical situations.

The U.S.-China trade war has created a dual-layered supply chain, with TSMC and NVIDIA adapting in different ways. TSMC's U.S. expansion is a key factor in this adaptation.

TSMC's partnerships with Foxconn and Wistron in Texas further cement its role in U.S. AI infrastructure. This strategic move aligns with the Biden and Trump administrations' reshoring agendas, making TSMC a geopolitical favorite.

NVIDIA, while agile in navigating export controls, faces margin pressures from a 15% tax on China exports. This tax, combined with the risk of losing market share to local Chinese chipmakers, poses a significant challenge to NVIDIA's market position.

For investors with a 10-year horizon, TSMC offers a more balanced risk-reward profile.

Its valuation is attractive relative to its growth potential, making it a great choice for long-term investors.

Consider overweighting TSMC in a diversified semiconductor portfolio, allocating 40% to TSMC for its stable, capital-efficient growth.

TSMC's business model is resilient to sector-specific shocks, providing a stable foundation for long-term growth.

NVIDIA, while a compelling growth story, carries higher volatility due to its premium valuation and exposure to regulatory and technological disruptions.

Allocate 30% to NVIDIA for its high-growth AI exposure, and the remainder in cash or defensive plays to hedge against sector-wide risks.

Monitor U.S.-China trade policies and AI adoption rates in edge computing, as these will be critical drivers for both companies.

TSMC's disciplined execution and strategic foresight could make it the decade's top performer, especially in the AI semiconductor arms race.

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