Benefitting from the advancement of artificial intelligence (AI)
Taiwan Semiconductor (TSMC) is a pioneer of the foundry model, which separates semiconductor chip designs from the fabrication (or manufacturing) process. Over the past 30 years, as the fabrication process became more complicated and capital intensive, fabless chip companies (companies that do not own factory plants, such as Nvidia) and system companies (e.g., Apple) have increasingly recognised the benefits of outsourcing the chip manufacturing to semiconductor foundries like TSMC.
Today, TSMC is the world’s largest semiconductor foundry (manufacturer) with more than 67% global market share (as at 4Q 2024), and its cutting-edge 3nm technology is the most advanced in the industry. While TSMC’s success is partly due to its operational excellence, the most critical point in the investment case, in our view, is the nature of the foundry business model, which means it doesn’t compete with its clients at the technology front-end, and its customers don’t have to worry about intellectual property transfer. On the flip side, TSMC gains exposure to the latest technology trends and doesn’t have to worry about obsolescence. This strengthens TSMC’s economic resilience and reinforces its leading position within the ecosystem. As the leader in its field, TSMC has been able to raise prices steadily over the years – an indication of its strong competitive moat.
In recent years, TSMC has been a major beneficiary of AI advancements. Revenue and profits are expected to continue to grow due to the “extremely robust” demand from AI, while sectors like robotics are expected to push semiconductor needs even higher. We believe it should continue to provide attractive compounding growth over the long run.
Attractive long-term growth
Source: Bloomberg, FactSet, FSSA Investment Managers, as at 30 April 2025. All figures in Taiwan Dollars.
* Book Value Per Share (BVPS): A measure of a company's assets, allocated to each outstanding share of common stock.
Earnings Per Share (EPS): A measure of a company's profitability, measured in terms of a company's profit allocated to each outstanding share of common stock.
Dividend Per Share (DPS): The sum of declared dividends for every ordinary share outstanding.
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