By otakuyassine3@gmail.com 
The production of semiconductors is an exceedingly competitive business. Semiconductors (or microchips as they’re commonly known) are a key component in electronics. You’ll find them in a variety of everyday devices, including televisions, radios, computers, tablets, and smartphones. But they’re also used in other industries, such as healthcare, transportation, communications, and military systems.
Some of the top players in the industry dictate much of technological progress for the world at large. A few companies own their foundries and brand chips with their own company name, such as Intel (INTC), while others custom-build chips for their clients. This group includes one of the largest and most successful companies you’ve probably never even heard of—Taiwan Semiconductor Manufacturing Company (TSM). Keep reading to find out more about this company and how it makes a profit.
Key Takeaways
- Semiconductor companies design and manufacture microchips used in electronics and other industries, including healthcare and communications.
- Taiwan Semiconductor Manufacturing Company is a Taiwan-based semiconductor company.
- The company makes its money by selling chips to clients all over the world.
- Apple accounts for about one-fifth of TSMC’s annual revenue and North America is TSMC’s largest market.
- Roughly 50% of TSMC’s revenue is derived from advanced chips of 5 nm or less.
Taiwan Semiconductor Manufacturing Company: An Overview
Taiwan Semiconductor Manufacturing Company is one of Taiwan’s largest companies and among the world’s leading semiconductor companies. Founded in 1987, the company is headquartered in Hsinchu, Taiwan, or the Republic of China.
Like its competitors, TSMC researches, designs, and manufactures microchips used in different applications. So the tablet you use to play games and the phone you use to text contain technology from semiconductor companies like TSMC.
TSMC produced nearly 12,000 products for 528 clients worldwide in 2023. In fact, the company produces chips for some of the largest names in the world. This includes A-series chips for Apple (AAPL), which is the company’s largest client. Other top TSMC semiconductor clients include Advanced Micro Devices, Broadcom, Intel, MediaTek, NVIDIA, NXP Semiconductors, OmniVision Technology, Qualcomm, and Renesas Electronics.
Taiwan Semiconductor Manufacturing Company Financials
Taiwan Semiconductor Manufacturing Company trades on the Taiwan Stock Exchange and the New York Stock Exchange (NYSE). The company’s market capitalization as of Oct. 3, 2024, was $791 billion.
The company’s revenue came in at NT$2.1 trillion, equivalent to USD $68 billion for the 2023 fiscal year. Net income was NT$837 billion, equivalent to USD$25.9 billion.
TSMC is the archetype of a company that exploits Moore’s Law, which is the observation that transistors halve in size or double in performance per area every two years. It specializes in producing extremely high-density computer chips, with the most advanced transistors measuring 5 nanometers or less. As of mid-year 2024, the company earned about 35% of its revenue from 5 nm chips, and an additional 15% from those measuring 3 nm or less.
These sophisticated chips are largely used for high-performance computing applications, which account for about 52% of TSMC’s market. Smartphones accounted for another third of TSMC’s products, with smaller amounts going into automotive, IoT, and other consumer electronics.
60%
Taiwan accounts for 60% of the global foundry market. The vast majority of that comes from TSMC.
Taiwan Semiconductor Manufacturing Company’s Business Segments
Taiwan Semiconductor sells chips to clients all over the developed world. Geopolitics does make an appearance in the company’s breakdown of its revenue by region. Geographically, North America is TSMC’s largest market, accounting for 65% of the company’s revenues. China is the next biggest, at 16%.
The Asia-Pacific, Japan, and EMEA follow with 9%, 6%, and 4% of revenues respectively.
TSMC’s customers can be divided into three classes:
This last refers to firms that design and sell chips, but farm out the business of actually making the things to Taiwan Semiconductor Manufacturing itself.
Even some giants of semiconductor production, such as Advanced Micro Devices (AMD), have switched from the so-called pure play model to farming out the production of chips to companies like TSMC.
Who Is TSMC’s Biggest Customer?
Apple is by far the largest customer of the Taiwan Semiconductor Manufacturing company. In 2023, Apple spent $17 billion on TSMC’s chips, accounting for a quarter of the company’s total revenue. The next largest company is Nvidia, which accounts for 11% of TSMC revenue.
Who Is TSMC’s Biggest Competitor?
Intel Corp. (INTC) is the largest competitor to TSMC in the microchip foundry market, although TSMC dwarfs Intel in terms of revenue. Intel brings in $55 billion each year, compared to $65 billion from TSMC.
How Did TSMC Become a World Leader in Chip Manufacturing?
There were several contributing factors that helped TSMC become a world leader in chip manufacturing. Government intervention played a major part; Taiwan’s government provided large subsidies to the chip industry, providing at early head start in the race for the most advanced chips. There are also geographical advantages; since computer engineering costs less in Taiwan, the country has a competitive edge over more developed economies.
The Bottom Line
Few industries are more capital-intensive than chip manufacturing. Even with the prohibitive outlays required in getting a fabrication plant up and running, Taiwan Semiconductor Manufacturing still manages to enjoy high-profit margins.
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