COMPANIES EXPLAINED

1. History and Founding

TSMC (Taiwan Semiconductor Manufacturing Company) was founded in 1987 in Hsinchu, Taiwan, by Morris Chang. As the world’s first dedicated semiconductor foundry, TSMC revolutionized the semiconductor manufacturing model by allowing fabless companies to design chips without maintaining their own manufacturing facilities.

Over the decades, TSMC became the leading semiconductor manufacturer globally, responsible for producing chips for major clients including Apple, AMD, Nvidia, and Qualcomm. The company’s advanced process nodes have kept it at the forefront of the semiconductor industry.

2. Sector and Industry

TSMC operates in the semiconductor manufacturing industry, primarily focusing on:

• Chip Fabrication for Electronics (CPUs, GPUs, SoCs)
• Advanced Process Technologies (5nm, 3nm, 2nm nodes)
• Research & Development for Next-Generation Semiconductors

TSMC competes with other semiconductor giants such as Samsung Foundry, Intel Foundry Services, and GlobalFoundries.

3. Revenue Streams – How TSMC Makes Money

• Chip Fabrication: Manufacturing chips for clients using cutting-edge nodes (5nm, 3nm).
• Wafer Manufacturing: Producing semiconductor wafers that are later cut into individual chips.
• Research and Development (R&D): Licensing advanced semiconductor technologies and processes.
• Specialty Technologies: Such as RF, MEMS, and automotive-grade chips.

4. Competitive Advantage & Strengths

• Technological Leadership: Dominates the industry with the most advanced semiconductor nodes.
• Client Base: Trusted by tech giants like Apple, AMD, Nvidia, and Qualcomm.
• High Profit Margins: Due to advanced manufacturing capabilities and premium pricing.
• Economies of Scale: Large-scale production lowers per-unit costs.

5. Risks & Challenges for Investors

• Geopolitical Risks: Tension between China and Taiwan poses a potential threat.
• Technological Competition: Intel and Samsung are ramping up advanced node development.
• Supply Chain Disruptions: Dependence on Taiwanese manufacturing hubs.
• Client Concentration: A large portion of revenue comes from a few key clients.

6. Future Growth Opportunities

• Expanding Advanced Node Capabilities: Developing 2nm and 1nm nodes.
• Global Expansion: New fabs in the U.S. and Japan to diversify production.
• Automotive Chips: Growing demand from the electric vehicle (EV) sector.
• AI and High-Performance Computing (HPC): Chips optimized for machine learning and data centers.

7. Conclusion – Why Investors Care

TSMC’s dominant position in the semiconductor manufacturing space, technological superiority, and long-standing relationships with major tech companies make it a crucial player in the global tech supply chain. While geopolitical risks persist, the company’s innovation and strategic expansion make it an attractive investment opportunity.