Should You Buy Taiwan Semiconductor Stock?


  • TSMC is the leading foundry in the semiconductor industry and its market share is likely to increase due to its technological developments.
  • It has good growth prospects supported by secular growth trends in its industry and an ambitious $100 billion investment program to be executed in the next three years.
  • Despite this attractive background, its valuation compared to peers is attractive making it a good long-term investment.

Taiwan Semiconductor Manufacturing Company (NYSE:TSM) is a leading foundry in the semiconductor industry and is investing massively in its business, boding well for revenue and earnings growth over the long-term, and has a reasonable valuation being therefore attractive for long-term investors.

Business Overview

TSMC was founded in 1987 and is based in Taiwan. It has been listed since 1997 and is traded in its domestic market and on the New York Stock Exchange. Its current market capitalization is about $635 billion, being one of the largest companies in the world by this measure.

TSMC pioneered the dedicated semiconductor foundry business model, being the world’s largest manufacturer of chips nowadays. Its market share is about 57% of global chip production, with its main competitor being Samsung Electronics (OTCPK:SSNLF). Most of its factories are located in Taiwan, but have also production in China and in the United States.

TSMC is the most advanced manufacturer in the world, with technology capable of producing the smallest chips nowadays, namely 3-nanometer and 5-nanometer nodes through ASML’s (ASML) extreme ultraviolet technology. Its competitors are also pushing for mass production of 3nm in the near future, with Samsung the best positioned after TSMC, while Intel plans 3nm production by 2025.

However, in 2020, TSMC only generated revenue from the 5nm technology as 3nm has not reached mass production yet, but the weight of advanced technologies (16nm and lower) are rapidly increasing (58% in 2020 vs. 50% in 2019) and this trend is only expected to accelerate in the next few years.

Source: TSMC.

By focusing solely on the manufacturing of chips, instead of designing or distributing under its own brand, TSMC does not compete directly with its customers, which can be an advantage over its peers Samsung and Intel (INTC).

TSMC has a very large number of

This article was written by

The Outsider profile picture
Invest in secular growth themes through long-term winners
From my academic training, Mathematics, I intend to focus on the quantitative study, basing my analysis on historical data, bearing in mind my position of "Outsider". 

I invest with a long-term perspective in industries/themes that have secular growth prospects and should deliver strong returns in a time frame of 10-15 years. Currently, I'm invested in Digital Payments/Fintech, Semiconductors, 5G/IoT/Big Data, Electric Vehicles, and the Metaverse.

Disclosure: I am/we are long ASML. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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