Thread by @alexis04613

$TSM Taiwan Semiconductor Manufacturing Company: the overlooked giant playing in a league of its own.

TSMC is the world’s largest and most advanced pure-play semiconductor foundry, commanding a dominant position in the global semiconductor industry.

(Thread)

Dominant Market Position:

TSMC holds a commanding 67% market share in the global semiconductor foundry market as of Q4 2024. Its dominance is particularly pronounced in advanced process nodes (7nm, 5nm, 3nm, and the upcoming 2nm), where it controls over 90% (!) of the market.

Who are $TSM's clients ?

👉🏼 Some of its notable clients include:
- Apple
- Nvidia
- AMD
- Qualcomm
- Broadcom
- Intel
These companies rely on TSMC for manufacturing advanced chips used in smartphones, high-performance computing, AI applications, automotive, etc.

Technological Leadership:

$TSM's 3nm and 2nm process yields outperform Samsung’s by 20% and 40%, respectively. Its ability to consistently deliver cutting-edge nodes on schedule - unlike Intel, which has faced repeated delays—has solidified its reputation as the go-to foundry.

Customer-Centric Model:

TSMC’s pure-play foundry model focuses exclusively on manufacturing, allowing it to optimize processes and costs without competing with its clients (unlike integrated players like Intel or Samsung). $TSM maintains a collaborative approach with customers.

Pricing Power:

$TSM technological superiority enable it to command premium pricing. Nvidia’s CEO has publicly stated that TSMC’s 30% price increase for U.S.-made chips is acceptable due to its unmatched quality and reliability.

Pricing power = strong margins.

AI and HPC Boom (1/2):

The surge in AI-related applications has created unprecedented demand for high-performance chips. $TSM's management forecasts AI accelerator revenue to double in 2025 and grow at a mid-40% CAGR (!) through 2029.

AI and HPC Boom (2/2):

High-Performance Computing (HPC) now accounts for 53% of TSMC’s revenue, surpassing smartphones as the largest contributor, reflecting the growing importance of AI and cloud computing.

Competitive Moat and Barriers to Entry:

The complexity and cost of advanced semiconductor manufacturing create high barriers to entry. The high cost and risk of switching foundries, combined with TSMC’s collaborative approach, create strong customer loyalty.

Overseas Expansion:

$TSM is investing $100 billion over the next four years to build five new facilities in the U.S., aligning with U.S. government efforts to reduce reliance on foreign chip manufacturing. Additional fabs in Japan and Europe further diversify its operations.

Growth projections:

For 2025 $TSM expects 25% revenue growth. Management forecasts a CAGR of nearly 20% (!) in revenue growth till 2029. This gives us:

A 2025 revenue of $112.5B.
A 2029 revenue of $233B.

Valuation:

At a net margin of 40%, 2029 net income would be $93B. Divide that by the number of outstanding shares and it gives us $18 in EPS in 2029. At a PE of 22 this equals a share price of $396, a 72% return from today's share price excluding the dividend (1.45%).

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