Company Overview: TSMC (Taiwan Semiconductor Manufacturing Company)
TSMC (NYSE: TSM) is the world’s largest semiconductor foundry, serving as a core hub for advanced semiconductor manufacturing. Its client base includes global leaders such as Apple, AMD, Nvidia, and Qualcomm. In this business model, customers handle chip design, while TSMC is solely responsible for manufacturing.
Founded in 1987 and headquartered in Hsinchu, Taiwan, TSMC pioneered the pure-play foundry business model and now accounts for over 50% of the global foundry market. It leads the industry in cutting-edge process technologies, particularly with dominant capabilities in sub-3nm manufacturing.
The demand for AI semiconductors and high-performance computing continues to rise, and TSMC maintains high operating margins through its focus on high-value process nodes. This technological edge and robust customer portfolio make TSMC a compelling long-term investment.
Technology and Competitive Strength
TSMC holds world-class semiconductor manufacturing technology and leads the industry in sub-3nm processes. The rising demand for AI, HPC, and 5G has further strengthened its technological leadership. Its early adoption of Extreme Ultraviolet Lithography (EUV) has significantly enhanced production efficiency and chip performance.
Production and Revenue Structure
TSMC operates a pure-play foundry model, producing chips based on designs from fabless customers. It generates revenue mainly through high-performance, low-power semiconductor manufacturing. Long-term contracts and capacity expansion investments provide a stable income structure, with an operating margin of approximately 43% as of 2024.
Growth Outlook
The global expansion of AI, autonomous vehicles, IoT, and cloud infrastructure provides long-term growth momentum for TSMC. Its overseas fabs in the U.S. and Japan help diversify geopolitical risks and meet global demand. Dedicated AI chip processes and high-performance computing needs are expected to be major future growth drivers.
Technological Advantage
Market Share and Global Position
TSMC holds over 60% of the global foundry market and ranks first in advanced process nodes. It outpaces competitors in production yield and technology development, serving as a vital player in the global semiconductor supply chain.
Comparison with Global Competitors
Samsung competes with its extensive capital and operations in both memory and foundry segments, while Intel uses a hybrid model of internal and outsourced manufacturing. TSMC, however, maintains a clear edge in specialization and focus, offering tailored manufacturing, strong reliability, and aggressive technology investment.
With its technological superiority and dominant market share, TSMC solidifies its position as a leading growth stock in the semiconductor industry, supported by a revenue structure capable of sustaining long-term profitability.
Financial Comparison with Competitors
| Indicator | TSMC | Samsung Electronics | Intel |
|---|---|---|---|
| Revenue | $90.08B | $200.0B | $53.1B |
| Net Income | $31.5B | $22.0B | -$0.5B |
| ROE | 36.06% | 8.58% | -0.51% |
| Net Profit Margin | 35.8% | 11.0% | -0.9% |
| Debt Ratio | 23% | 30% | 48% |
| Market Cap | $677.5B | $257.7B | $150.0B |
Overall, TSMC outperforms its competitors in terms of technological strength, profitability, and financial stability, making it a highly attractive long-term investment option.
TSMC Investment Suitability Assessment from a Value Investor’s Perspective
TSMC is the most critical foundry company in the global semiconductor industry. Through technology-driven management and a stable financial structure, it has proven its sustainable profitability and market dominance. With its sub-3nm process leadership, growing demand for high-performance semiconductors, and a diversified customer base, TSMC is a compelling long-term holding.
Below is a summary of why TSMC is considered a value-worthy investment based on core value investing principles.
1. Is it a business I can understand?
Yes. TSMC operates a clear business model that manufactures customer-designed chips (Fabless-Foundry model). It focuses solely on semiconductor contract manufacturing and defines its core competitiveness as process miniaturization and yield optimization, making it easy to understand.
2. Is it a stock I can hold long-term?
Yes. TSMC provides critical infrastructure for long-term growth industries such as AI, autonomous driving, and IoT. Its overseas fab expansion, customer lock-in, and high-value process-driven revenue model provide long-term stability.
3. Is the company highly competitive?
Yes. TSMC holds an unmatched lead in advanced sub-3nm processes and surpasses competitors in yield and production capacity. It enjoys higher customer trust than Samsung or Intel and leads the industry in EUV process and R&D investment.
4. Is the management trustworthy?
Yes. Based on the philosophy of founder Morris Chang, TSMC has established a professional management system with high technical understanding and strategic execution. As of 2024, its ROE is approximately 36%, among the highest in the industry, earning continuous trust from global investors.
5. Even a great company isn’t worth buying at any price.
As of 2025, TSMC’s PER is around 21x and PBR is around 5x, which is considered reasonable for a high-growth tech company. Given its strong technological moat and stable customer base, the current valuation is within a favorable range for long-term compounding.
TSMC (Taiwan Semiconductor ADR) Key Financial Metrics (2024)
| Metric | 2024 (TWD million) | Meaning & Analysis |
|---|---|---|
| Revenue | 2,894,299.12 | Consistently solid scale, confirming growth stability |
| Net Income | 1,173,264.26 | Outstanding profitability with ~40% net margin |
| Operating Cash Flow | 1,826,177.07 | Strong cash generation enables reinvestment and dividends |
| Investing Cash Flow | -864,842.77 | Ongoing capex to build long-term growth drivers |
| Free Cash Flow (FCF) | 961,334.30 | Very healthy FCF after investment outflows |
| ROA (Return on Assets) | 19.18% | Top-tier asset efficiency within the industry |
| PER (Price to Earnings) | 21.79x | Reasonable valuation considering its growth |
| PBR (Price to Book) | 5.97x | Reflects premium for tech leadership and profitability |
Summary
TSMC consistently maintains high profit margins and strong cash flow, demonstrating excellent profitability, growth potential, and financial stability. From an investor’s standpoint, it is a highly attractive candidate for long-term investment.
Source: Naver Finance – TSMC Annual Financial Statements
Summary of Expert Opinions
Most global investment firms and analysts rate TSMC as a “Buy” or “Strong Buy”. This is based on the company’s superior technological competitiveness, stable profitability, and excellent cash flow, which suggest strong long-term growth potential.
Key Evaluation Highlights
- Revenue stability: Maintained high revenue at TWD 2.89 trillion in 2024
- Profitability (Net Margin): Around 40%, among the highest in the industry
- ROA: 19.18%, indicating high asset utilization efficiency
- Operating Cash Flow: Over TWD 1.82 trillion, showing strong cash generation
- Process leadership: Maintains clear dominance in sub-3nm technology
Editor’s Final Thoughts
TSMC continues to receive favorable evaluations due to its outstanding technology, high profitability, and stable cash flow. Given its leadership in advanced processes, it is considered a highly attractive stock for long-term investment. However, investors should remain aware of geopolitical risks and semiconductor market cycle volatility.
Source: Naver Finance – TSMC Annual Financial Statements
TSMC Investment Risks
Geopolitical Risks
- Volatility due to political tensions between China and Taiwan
- Rising cost burden from overseas facility investments to diversify supply chains
Industry Cycle Risks
- High sensitivity to demand fluctuations within the semiconductor industry
- Directly impacted by performance and demand changes from major clients (e.g., Apple, NVIDIA)
Technology Risks
- Potential competitiveness loss if advanced process development or yield management fails
- Increasing competition from technologically advancing rivals like Samsung and Intel
A Final Word to My Readers
The semiconductor market is currently facing rapid technological shifts and global economic uncertainties, making it more unpredictable than ever.
However, these uncertain times offer rare opportunities to buy great companies at attractive prices for those who adhere to the principles of value investing. TSMC, with its cutting-edge technology and high barriers to entry, is a stock that requires patience and careful observation rather than rushed decisions.
Global investors should not only focus on short-term price movements, but also consider geopolitical risk, long-term industry growth potential, and intrinsic technological competitiveness. Believing in the power of long-term compounding, I encourage you to remain a prepared and patient investor.
True value investing lies in identifying companies with intrinsic value that others have yet to discover, and having the discipline to wait for that value to be realized.
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※ Disclaimer: This content is for informational purposes only and does not constitute investment advice. Investment decisions should be made at your own discretion.
