🏭 What TSMC Does
Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest semiconductor foundry — it manufactures chips designed by others for companies like Apple, NVIDIA, AMD, and Qualcomm.
- Business model: Pure-play foundry (focus only on manufacturing, no own products)
- Main segments: High-Performance Computing (AI & data centers), Smartphones, Automotive & IoT
- Technology edge: Leading nodes (5 nm, 3 nm, 2 nm in R&D) and high yield rates
👉 Plain English: TSMC is the world’s “chip factory.” It builds the brains inside iPhones, GPUs, and AI servers for nearly every tech giant.
💵 Financial Highlights
- Revenue 2024: ≈ $88 billion ( up from $70 billion in 2023 )
- Net Income: ≈ $35 billion 💰
- EPS: $13.7 per share
- Gross Margin: 76 % ( among the highest in the industry )
- Strong cash flow enabled record CapEx spending while building new fabs in the U.S. and Japan.
👉 Plain English: After a small dip in 2023, TSMC bounced back sharply in 2024 as AI demand surged.
⚠️ Key Risks
- Geopolitical tension: Most fabs are in Taiwan → exposure to China conflict risk.
- Supply chain dependence: Relies on ASML for EUV equipment and ultra-pure materials.
- Customer concentration: Apple and NVIDIA drive a large portion of sales.
- Competition: Samsung and Intel are investing heavily to catch up.
- ESG & environmental: High power and water use in fabs; climate events in Taiwan pose operational risk.
👉 Plain English: TSMC’s main risk is location — most production is in Taiwan, while rivals and governments worldwide are racing to localize chip supply.
📈 MD&A Highlights
- Revenue growth driven by AI and data-center chips.
- Gross margins remained strong thanks to pricing power in advanced nodes.
- R&D and CapEx investments rose as TSMC expanded fabs in Taiwan, the U.S., and Japan.
- Cash reserves increased despite heavy spending, showing robust operating cash flow.
👉 Plain English: TSMC used its strong profits to fund massive expansion while keeping a solid balance sheet.
💡 Takeaway for Investors
TSMC is not just a chip company — it’s the backbone of global tech.
Its leadership in manufacturing and financial strength justify a premium valuation, but investors should stay aware of geopolitical and capacity-expansion risks.
📊 Key Financial Ratios
| Ratio | 2022 | 2023 | 2024 |
|---|---|---|---|
| ROE (%) | 28.5 | 26.8 | 29.5 |
| ROA (%) | 18.7 | 18.1 | 19.9 |
| ROTC (%) | 20.1 | 20.3 | 22.0 |
| ROIC (%) | 21.3 | 22.5 | 24.0 |
| Gross Margin (%) | 73.0 | 74.5 | 76.1 |
| Operating Margin (%) | 45.3 | 49.2 | 51.9 |
| Pretax Margin (%) | 46.5 | 50.3 | 53.2 |
| Net Margin (%) | 44.4 | 42.3 | 40.0 |
| Debt-to-Equity Ratio (D/E) (%) | 34.0 | 32.0 | 28.5 |
| Net Debt / EBITDA (x) | 0.4 | 0.3 | 0.2 |
| Interest Coverage (x) | 12.8 | 14.9 | 18.5 |
| Current Ratio (%) | 150 | 155 | 162 |
| Quick Ratio (%) | 125 | 130 | 135 |
| Fixed Asset to Long-term Capital Ratio (%) | 87.0 | 88.0 | 90.5 |
📝 Disclaimer
This article is intended for educational purposes only. It does not constitute financial, investment, or legal advice. All investment decisions involve risks, and readers should conduct their own research or consult with a licensed financial advisor.