History and Core Business
Taiwan Semiconductor Manufacturing Company (TSMC), founded in 1987 and headquartered in Hsinchu, Taiwan, has become the world’s largest semiconductor foundry. TSMC’s core competency lies in its advanced manufacturing processes and capabilities, allowing it to produce cutting-edge chips for various industries. The company’s business model revolves around manufacturing semiconductors for other companies such as Apple and Nvidia, perfecting a highly flexible production line while maintaining neutrality in chip design. TSMC does not compete with its customers in terms of chip design. In 2022, TSMC began mass production of 3nm chips, marking a significant technological advancement. TSMC plans to advance its semiconductor manufacturing technology from the current 3nm node to 2nm by 2025, followed by 1.4nm around 2028. It aims to reach the 1nm node by 2030 while concurrently developing advanced packaging technologies for multi-chiplet solutions. This approach enabled TSMC to capture 50% of the global market for standard and 90% for high-end chips, and revenue has grown by 96% in the three years through 2023. TSMC has established seven fabs outside of Taiwan in the United States (Arizona and Washington), China (Shanghai and Nanjing), Japan (Kumamoto), Germany (Dresden), and Singapore as part of its global expansion strategy to diversify manufacturing capabilities and strengthen its supply chain.
#1 Global Foundry
TSMC’s success can be attributed to its unwavering commitment to innovation, research, and development. The company consistently invests a significant portion of its revenue into R&D (8-10%), allowing it to stay at the forefront of emerging technologies and offer the most advanced chips on the market. TSMC’s extensive fab network provides flexibility in catering to various market segments. This adaptability and strong partnerships with leading design companies have solidified TSMC’s position as the industry foundry leader. TSMC is now the world’s 2nd most valuable semiconductor company with a market cap of US$1T behind Nvidia’s $3.4T.
Future Outlook and Challenges
TSMC faces significant geopolitical risks due to tensions between China and Taiwan and U.S.-China trade conflicts that threaten its operations and market access. The changing technology landscape, particularly in AI and machine learning, presents opportunities for TSMC to develop semiconductors and chipsets using the latest technologies. TSMC’s expansion of its global presence to seven fabs outside of Taiwan demonstrates its commitment to supply chain resilience. Despite facing competition from companies like Intel, Samsung, and GlobalFoundries, TSMC’s technological leadership, strong financial position, and customer-centric approach position it well for continued success. TSMC’s executive management, led by C.C. Wei, demonstrates exceptional capability through their strategic vision, technological leadership, and customer-centric approach. This has driven the company to maintain its position as the world’s leading semiconductor foundry while consistently delivering cutting-edge manufacturing processes and strong financial performance.
Credit: Jeffrey Cooper, perplexity