Stock Trading: Taiwan Semiconductor Manufacturing Company Limited

Taiwan Semiconductor Manufacturing Company Limited
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Taiwan Semiconductor Manufacturing Company Limited
Taiwan Semiconductor Manufacturing Company Limited, commonly known as TSMC, is a multinational semiconductor company headquartered in Hsinchu, Taiwan. TSMC is the world's largest dedicated independent semiconductor foundry, meaning they manufacture semiconductor chips for other companies that design and sell their products. TSMC produces a wide range of semiconductor products, including integrated circuits, logic chips, microprocessors, and memory chips. Their products are used in a variety of industries, such as consumer electronics, automotive, and telecommunications (Yahoo Finance, 2023). The company has manufacturing facilities and offices located in Taiwan, China, the United States, Japan, and Europe. Taiwan is TSMC's primary manufacturing location, with multiple facilities located throughout the country. In addition, TSMC has established joint ventures with companies in China to expand its operations in the region. The company also has a strong presence in the United States, with manufacturing facilities and offices located in California and Arizona. They have announced plans to build a new semiconductor manufacturing plant in Arizona, which is expected to begin operations in 2024 (Liu & Mozur, 2023).
Over the past five years, the company has been experiencing significant growth in its sales figure from the US$1.07 trillion reported in the 2019 financial year to the US$ 2.264 trillion reported last year. To this end, the company has managed to double its revenue for the past five years, with a recorded 28.08 percent growth for the last five years. Analysts expect the company to grow by 21.5 percent over the next five years. The growth can be attributed to the resilience of the semiconductor industry during the pandemic, driven by increased demand for electronics and technology as people work and learn from home. Notably, TSMC's market position as a dominant player in the semiconductor foundry market has helped it maintain its revenue growth during the pandemic. As a dedicated foundry, TSMC is not tied to any semiconductor design or product, which means that it can work with a wide range of customers across different industries. It is also essential to attribute the company’s growth in revenue to its adaptability. The company has invested heavily in new technologies and manufacturing processes, such as its advanced 7nm and 5nm semiconductor nodes, which have helped it maintain a technological edge over its competitors. This has allowed TSMC to continue to attract new customers and expand its market share, even during the pandemic.
Though based in Taiwan, the company reports most of its sales through export. At the height of the pandemic in 2020, TSMC's total revenue increased by 25.2% compared to the previous year, with a significant portion of this growth attributed to strong demand for its products from overseas markets. According to the company's financial reports, exports accounted for approximately 95% of TSMC's total sales in 2020. TSMC's export performance was particularly strong in the United States and China, which are two of its largest export markets. In the United States, TSMC's exports increased by more than 50% in 2020, driven by increased demand for its advanced semiconductor products used in smartphones, gaming consoles, and data centers. In China, TSMC's exports increased by approximately 30% in 2020, as the country continued to invest in its semiconductor industry and increase its domestic production capacity.
One potential problem associated with an investment in the company is the frosty US-China relationship given that the semiconductor industry is highly politicized and closely tied to the economies of both countries. On the one hand, TSMC is heavily reliant on the United States market, with many of its customers based in the US. The US government has also been a key partner for TSMC in terms of providing investment and support for its US operations. However, the US-China trade tensions have led to increased scrutiny of Chinese companies by the US government, which has had an indirect impact on TSMC's operations. For example, the US govern...