In their latest report TrendForce revealed that in 2023, Semiconductor foundry revenues hit US$117.47 billion, with TSMC capturing a dominant 60% share. This figure is expected to climb to around $131.65 billion in 2024, increasing TSMC’s share to 62%. Not only is TSMC leading in revenue, but it has also strategically selected the US, Japan, and Germany as pivotal locations for its advanced and mature factories. Japan is moving at the fastest pace, with some projects even ahead of schedule. Since 2023, the only foundry that increased their revenue was TSMC, thanks to the availability of single digit noted that are used in AI and server applications.
Taiwan Semiconductor Manufacturing Company (TSMC) has experienced significant earnings growth over the years due to several key factors:
(1) Advanced semiconductive technology: TSMC made single digit nodes available to customers. Nodes such as 7nm, 5nm, 3nm, etc. are production ready. The charts below show that over 50% of TSMC revenue is coming from advanced node. Where 3nm wafer price is estimated as $20,000.
Source: TSMC
(2) Trends in outsourcing: Many semiconductor design companies prefer to outsource their products to specialized foundries like TSMC rather than investing in their own manufacturing plants Outsourcing enables these companies to leverage TSMC’s expertise and economies of scale in manufacturing. This outsourcing trend has contributed significantly to TSMC’s revenue growth as more companies rely on its foundry services.
(3) Increased use of mobile devices: The proliferation of smartphones, tablets, wearables and other mobile devices has increased the demand for TSMC semiconductor manufacturing. While mobile device manufacturers demand powerful, energy efficient materials, they turn to TSMC for advanced chip manufacturing solutions Its ability to produce chips with smaller form factors, higher performance and lower power consumption matches the needs of the mobile device market, and it increases revenue.
(4) Emerging Technologies: TSMC’s revenue is also driven by emerging technologies such as 5G, artificial intelligence, machine learning, augmented reality, virtual reality, autonomous vehicles etc. This technology requires specialized semiconductor components with advanced materials and capabilities. TSMC’s investments in research and development enable it to remain at the forefront of technological innovation, and attract customers looking to take advantage of these emerging trends.
(5) Geopolitical factors: TSMC’s strategic location in Taiwan and its independence from any one market or geopolitical influence make it well placed in the face of global uncertainty. As geopolitical pressures affect the semiconductor industry, TSMC’s reputation for reliability, technological leadership and geographic diversity has helped boost its revenues Besides, governments and corporations around the world recognize the importance of a robust and diversified semiconductor supply chain.
(6) The increasing use of artificial intelligence (AI) technology has also played an important role in boosting TSMC’s earnings. AI applications require specialized hardware, such as AI accelerators and neural processing units (NPUs), which require advanced semiconductor technologies for high-performance AI due to TSMC’s expertise in high-performance chips to fit into the AI industry. It is positioned as a preferred partner for companies developing enabling products and services, helping to grow its revenues.
Source: TrendForce
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