The rise and growth of Taiwan Semiconductor Manufacturing Company Ltd. (TSMC), has been a spectacle to admire in the financial market. In spite of geopolitical turmoil, TSMC enjoys a promising future cultivated by the consumer demand for the latest technology. Indeed, the company’s innovative manufacturing of silicon chips, which continually improves, and provides cutting-edge technology that surpasses its competitors. However, competition from China and the heavy reliance on American customers to generate revenue means that investing in the company might prove risky. High production costs involved in conducting trials for new silicone chips might mean that the company loses its geopolitical “silicone shield.” TSMC has and will continue to be a major factor in supply chains and international relations; one must ask, however, if the odds are, more than ever, stacked against it.
TSMC: Defining a Country
Morris Chang, known widely as the “Father of Taiwan’s Semiconductor Industry,” served as the pioneer behind the foundry model for semiconductor manufacturing. During his tenure, TSMC became the world leader in semiconductor production. Today, TSMC produces chips and processors for the likes of Apple, Nvidia, and AMD—firms that drive trillion-dollar industries.
Born in Ningbo, China, in 1931, Morris Chang’s ambitions had nothing to do with engineering—he wanted to tell stories as a novelist. But with no support from his father, he conceded and eventually pursued mechanical engineering. In 1949, he moved to the United States and enrolled in Harvard University but pivoted his career path and transferred to another university. After earning a Bachelor’s Degree and Masters of Science Degree in Mechanical Engineering, along with a Master’s in Engineering from the Massachusetts Institute of Technology (MIT), he began his professional career in Sylvania Semiconductor. A few years later, he transferred to Texas Instruments wherein he introduced a strategy that involved regular price-cuts on integrated circuits, bolstering the company to new heights and changing the chip manufacturing industry’s landscape at the time.
Chang’s genius lies in being able to recognize that the future of technology would hinge on not just chip design, but finding manufacturing precision as well. While many American firms stuck to a vertically integrated “IDM” (Integrated Device Manufacturer) model, TSMC took strides in specialising. TSMC’s foundry business model boasts approximately 57% share of the market, and controls about 80% of the high-end artificial intelligence (AI) chip market. TSMC weathered the 2023 recession better than Samsung or Intel, maintaining its market dominance thanks to booming AI demand and the natural insulation foundries enjoy from market volatility through their customized production mode.
Chang’s recruitment in the mid-1980s was a quiet geopolitical masterstroke by Taiwan; it planted the seeds of what would become Taiwan’s “Silicon Shield”—a geopolitical deterrent since more and more countries are growing reliant on Taiwan’s semiconductor production. Yet, it was because of Chang’s twenty-five year stint in Texas Instruments that TSMC has become the giant it is today. At the time, Taiwan lacked a tech giant of its own to compete with the likes of Japan and the United States. But instead of competing with them, Morris Chang envisioned a pure-play foundry that enables, rather than contends with, companies like Advanced Micro Devices (AMD)—an audacious gamble, but one that paid off tremendously. In 2023, Taiwan’s chip industry comprised 15% of its GDP.
However, as US-China tensions escalated in the 2020s, TSMC’s fabrication plants emerged as a strategic chokepoint for both countries. Moreover, many nations also realized that TSMC’s output was critical in cementing their success in the rapidly advancing technological landscape as tensions run higher and the semiconductor industry trudges forward.
Today, Taiwan’s “Silicon Shield” isn’t merely a key factor of their booming economy—it has also become a geopolitical lifeline. Just as iPhone sales impact the world, so too do TSMC’s chips in the global market. Chang’s twofold legacy of building TSMC and revolutionising chip production with his manufacturing prowess has undoubtedly opened doors in the digital age not only for Taiwan, but also the world at large. It is clear that these chips do not just power your phones—they power an entire country’s economy too. Another important question arises, however: what has helped TSMC become such a manufacturing juggernaut?
What Does TSMC’s Future Promise?
TSMC has relished great success and accelerated growth, originating from the promising future of Artificial Intelligence and Machine Learning (ML). In April 2025, the company reported a 60.3% rise in their net income which was $18.71 billion AUD. The company holds 64.9% of the market share in the global semiconductor foundry industry and caters to companies such as Apple, Nvidia, AMD and even Intel, allowing dominate and reap monopolistic profits.
TSMC’s manufacturing chips power personal computers, smartphones, gaming consoles and various devices, marking them as a necessity for tech giants. The innovative technology utilises advanced process nodes that ensure chips are power efficient, providing devices with a longer run-time. In the past, TMSC was one of the first companies to adopt extreme ultraviolet (EUV) lithography, which is manufacturing technology that uses 13.5nm light to create intricate patterns on silicon wafers. As a consequence, chipmakers can pack more transistors within chips — helping them be faster and energy efficient. Such advanced tech provides a pathway for companies to create products with augmented reality, AI and ML. The company is developing 2nm chips and is currently running trials on prototype chips. Risk analysis and trials began in July 2024, and by July 2025, the company seeks to mass-produce the improved chips. The venture promises a 15% performance boost and almost 30% reduction in power consumption compared to 3nm chips.
Demand for high performance computing stems from the rapid growth of technology. AI and ML models require massive computational power to run and since consumers require fast responses from tech, the chips need to be quick and responsive. With every smartphone model, more features such as increased battery life, fast processing and high resolution graphics are commonly added. Hence, companies like Apple produce premium devices by leveraging TSMC’s technology which uplifts the company’s desirability and has allowed it to capture the semiconductor market. The company boasts an impressive portfolio of customers and has a strong reputation in the market. It is renowned for building the A-series & M-series application processors for Apple with the M-series chips supplying a clock speed ranging from 2.06 GHz to 4.51 GHz.
As a share, TSMC has seen stable growth within the past 5 years. While it was not spared from the hit of tariffs announced by US President Donald Trump and faced the brunt of the market’s downfall. The introduction of tariffs also meant a surge in consumer purchases with consumers and firms unsustainably stockpiling. Currently, the company has a market capitalisation of $1227.11 billion AUD, with a yearly net income of $57.05 billion AUD and a promising future in the tech industry. A high yield is also promised by the company’s production.
Can TSMC Continue to Outperform?
Turning to the near-term outlook for TSMC, investors and market analysts remain broadly bullish. While a solid investment case is made by the firm’s robust and exciting fundamentals, TSMC’s future is anything but certain. Growing competition, uncertainties surrounding substantial US investment and the looming threat of US tariffs all introduce layers of nuance that investors must carefully balance.
In terms of competition, ambitious Chinese firms supported by aggressive state investments are likely to arise as fierce competitors. Over recent years, “Beijing has made AI a national priority” with the “Big Fund III” providing over AUD$73B in fresh investment for China’s emerging semiconductor sector. Whilst over a longer time horizon, the scale of this investment could see Chinese firms as direct rivals to TSMC, the current technological gap, coupled with the Taiwanese giant’s dominant market share and scale, mean that this threat remains minimal for now. To illustrate this, the largest Chinese firm, Semiconductor Manufacturing International Corporation (SMIC), currently manufactures 7nm chips (two full generations behind TSMC’s 3nm), highlighting the stark difference in technological capacity. Additionally, TSMC’s net profit as of Q4 2024 is over ’70 times that of SMIC’ despite only boasting 12 times the revenue of the Chinese rival – a clear reflection of TSMC’s current operational superiority.
Figure 1. TSMC outperforms its competitors. Source: Bloomberg
The most significant economic policy of the Trump administration is its hardline tariff agenda, with the American President directly threatening “massive tariffs” on the global chip industry. As of today, TSMC remains unbothered by this threat, projecting minimal change in customer behaviour and sales, as well as revenue increases of 20% in 2025. The threat is however, far from trivial and could significantly increase import costs for US clients. Compounding this is the fact that TSMC is highly exposed to US clients, with well over 50% of revenue being generated through US based sales. Due to this, any dampening of US demand would negatively impact TSMC’s margins, forcing the firm to make significant supply chain adjustments to work around the tariffs.
Trump and TSMC announce $100 billion plan to build five new US factories. Source: Reuters
To appease the President and reassure major US clients, in March of 2025 TSMC announced a US$100B plan to build 5 new US factories in Arizona. The investment will effectively tariff-proof a portion of TSMC’s supply, allowing for a more streamlined and efficient supply chain for US customers. The deal is not without substantial economic risk, as evidenced by the first two US-based facilities seeing significant production delays largely due to the lack of technically proficient workers. To address this, TSMC must effectively build a workforce from scratch. To date, they have sent 500 veteran Taiwanese engineers to train local workers and bridge the skill gap. The implications of this remain to be seen, though the expected annual production of the US facility, once efficient, is 600,000 wafers, roughly 3-4% of TSMC 16 million annual capacity. Thus, this only modestly augments long-term production.
Arizona Facility, Source: TSMC
Conclusion
As global demand for cutting-edge semiconductors intensifies, TSMC’s ability to continuously adapt and innovate will ultimately determine the company’s future. As of today, TSMC’s market dominance and cutting-edge technology position the firm as a critical player in the AI and ML space for the foreseeable future. This future is, however, far from set in stone, with TSMC having to carefully navigate the substantial geo-political challenges stemming from escalating US-China tensions, a high-exposure to US clients and the looming threat of tariffs. Whether TSMC can maintain its competitive edge amid these pressures will be of great significance for not only the firm and its investors but the broader increasingly interconnected technological landscape.
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Image source: https://www.bloomberg.com/news/articles/2025-04-16/tsmc-s-tariff-risks-leave-analysts-cautious-ahead-of-earnings
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