In the fast-evolving semiconductor industry, Taiwan Semiconductor Manufacturing Company Limited (TSM) and IPG Photonics Corporation (IPGP) stand out for their innovation and market impact. TSM is a global leader in wafer fabrication, while IPGP specializes in advanced fiber laser technologies. Both companies play crucial roles in technology development, making them compelling candidates for investors seeking growth potential. Let’s explore which one offers the most promising opportunity for your portfolio.
Table of contents
Companies Overview
I will begin the comparison between Taiwan Semiconductor Manufacturing Company Limited and IPG Photonics Corporation by providing an overview of these two companies and their main differences.
Taiwan Semiconductor Manufacturing Company Limited Overview
Taiwan Semiconductor Manufacturing Company Limited (TSM) is a leading semiconductor manufacturer headquartered in Hsinchu City, Taiwan. Founded in 1987, TSM specializes in wafer fabrication processes for integrated circuits and semiconductor devices. Its products serve diverse markets including high performance computing, smartphones, and automotive sectors, reflecting its broad global footprint and technological expertise.
IPG Photonics Corporation Overview
IPG Photonics Corporation (IPGP), based in Marlborough, Massachusetts, develops and sells high-performance fiber lasers and amplifiers primarily for materials processing applications. Established in 1990, IPGP offers a variety of laser products and integrated systems used in communications, medical, and advanced industrial fields. The company markets its products through direct sales and partnerships worldwide.
Key similarities and differences
Both TSM and IPGP operate in the semiconductor industry and focus on advanced technology products. TSM’s business centers on semiconductor wafer fabrication for multiple device types, while IPGP specializes in fiber laser systems and optical amplifiers. TSM’s scale is significantly larger, with over 65K employees and a market cap exceeding 1.6T USD, compared to IPGP’s smaller size of around 4.7K employees and a market cap near 3.3B USD. Their product applications and customer bases also show distinct industry focuses.
Income Statement Comparison
This table presents a side-by-side comparison of key income statement metrics for Taiwan Semiconductor Manufacturing Company Limited and IPG Photonics Corporation for the fiscal year 2024.
| Metric | Taiwan Semiconductor Manufacturing Company Limited | IPG Photonics Corporation |
|---|---|---|
| Market Cap | 1.70T TWD | 3.27B USD |
| Revenue | 2.89T TWD | 977M USD |
| EBITDA | 1.98T TWD | 76M USD |
| EBIT | 1.32T TWD | 14M USD |
| Net Income | 1.16T TWD | -182M USD |
| EPS | 223.4 TWD | -4.09 USD |
| Fiscal Year | 2024 | 2024 |
Income Statement Interpretations
Taiwan Semiconductor Manufacturing Company Limited
Taiwan Semiconductor Manufacturing Company Limited (TSM) demonstrated strong revenue growth, increasing from 1.34T TWD in 2020 to 2.89T TWD in 2024, with net income rising from 510B to 1.16T TWD. Margins remained robust, with gross margin at 56.12% and net margin at 40.02% in 2024. The latest year showed a 33.9% revenue increase and a slight net margin growth, highlighting continued strength.
IPG Photonics Corporation
IPG Photonics Corporation (IPGP) experienced declining revenue, falling from 1.2B USD in 2020 to 977M USD in 2024, with net income turning negative at -182M USD in 2024 from a positive 160M USD in 2020. Gross margins remained moderate at 34.61%, but net margins were negative at -18.58%. The most recent year showed deteriorating profitability and significant margin contraction.
Which one has the stronger fundamentals?
TSM’s fundamentals appear stronger, characterized by consistent revenue and net income growth, favorable margins, and positive earnings per share trends. Conversely, IPGP shows unfavorable income trends with declining revenues, negative net income, and worsening margins. Overall, TSM’s income statement metrics suggest more robust and stable financial health over the period analyzed.
Financial Ratios Comparison
Below is a comparison of key financial ratios for Taiwan Semiconductor Manufacturing Company Limited (TSM) and IPG Photonics Corporation (IPGP) for the fiscal year 2024.
| Ratios | Taiwan Semiconductor Manufacturing Company Limited (TSM) | IPG Photonics Corporation (IPGP) |
|---|---|---|
| ROE | 27.3% | -8.97% |
| ROIC | 20.0% | -9.97% |
| P/E | 29.0 | -17.8 |
| P/B | 7.92 | 1.59 |
| Current Ratio | 2.36 | 6.98 |
| Quick Ratio | 2.14 | 5.59 |
| D/E (Debt-to-Equity) | 0.247 | 0.0089 |
| Debt-to-Assets | 15.6% | 0.78% |
| Interest Coverage | 126 | 0 |
| Asset Turnover | 0.433 | 0.427 |
| Fixed Asset Turnover | 0.884 | 1.66 |
| Payout ratio | 31.3% | 0% |
| Dividend yield | 1.08% | 0% |
Interpretation of the Ratios
Taiwan Semiconductor Manufacturing Company Limited
TSM exhibits mostly strong financial ratios with favorable net margin (40.02%), ROE (27.29%), and ROIC (20.0%). Its liquidity and solvency ratios, like current ratio (2.36) and debt-to-assets (15.65%), are also favorable. However, valuation metrics such as P/E (29.04) and P/B (7.92) appear stretched. TSM pays dividends with a moderate yield of 1.08%, supported by healthy free cash flow, indicating sustainable shareholder returns.
IPG Photonics Corporation
IPGP shows several weak ratios, including a negative net margin (-18.58%), ROE (-8.97%), and ROIC (-9.97%), reflecting profitability challenges. Its liquidity ratios are mixed; a high current ratio (6.98) contrasts with concerns over asset turnover (0.43). The company does not pay dividends, likely due to losses and a focus on reinvestment or growth. Share buybacks or R&D priorities may be impacting cash allocation.
Which one has the best ratios?
Comparing both, TSM presents a more favorable ratio profile with strong profitability, solid liquidity, and reasonable debt levels, despite some valuation concerns. IPGP’s ratios suggest operational and profitability weaknesses, with no dividend payouts and a less efficient asset base. Overall, TSM’s ratios are more robust and indicate stronger financial health.
Strategic Positioning
This section compares the strategic positioning of TSM and IPGP, including market position, key segments, and exposure to disruption:
TSM
- Leading global semiconductor manufacturer with strong market presence and moderate competitive pressure.
- Focused on wafer fabrication and integrated circuits used in computing, smartphones, and automotive.
- Invests in technology startups and develops advanced semiconductor processes to mitigate disruption.
IPGP
- Smaller semiconductor firm specializing in high-performance fiber lasers, facing niche competitive dynamics.
- Diverse laser products for materials processing, communications, and medical applications driving growth.
- Develops cutting-edge fiber lasers and amplifiers, adapting to technological shifts in laser applications.
TSM vs IPGP Positioning
TSM operates a highly diversified business with a global footprint in semiconductor wafer fabrication. IPGP maintains a more concentrated focus on fiber lasers and related systems. TSM’s scale offers broad market reach, while IPGP targets specialized laser segments with innovative products.
Which has the best competitive advantage?
TSM demonstrates a slightly favorable moat by creating value despite declining profitability. IPGP shows a very unfavorable moat, shedding value with steeply declining returns, indicating weaker competitive positioning over the evaluated period.
Stock Comparison
The past year has seen Taiwan Semiconductor Manufacturing Company Limited (TSM) exhibit a strong bullish trend with significant price appreciation and accelerating momentum, while IPG Photonics Corporation (IPGP) has faced a bearish trend marked by deceleration and declining prices.
Trend Analysis
Taiwan Semiconductor Manufacturing Company Limited’s stock price increased by 152.54% over the past 12 months, showing a bullish trend with acceleration and a high volatility level indicated by a 51.25 standard deviation. The stock ranged between 127.7 and 327.11.
IPG Photonics Corporation’s stock price declined by 9.39% over the same period, reflecting a bearish trend with deceleration and lower volatility at a 9.27 standard deviation. Prices fluctuated from 52.12 to 90.69.
Comparing both trends, TSM delivered the highest market performance with a substantial bullish gain, whereas IPGP experienced a bearish decline, indicating contrasting stock momentum and investor sentiment.
Target Prices
Analysts present a confident target price consensus for Taiwan Semiconductor Manufacturing Company Limited and IPG Photonics Corporation.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Taiwan Semiconductor Manufacturing Company Limited | 400 | 330 | 361.25 |
| IPG Photonics Corporation | 96 | 92 | 94 |
The target consensus for TSM at 361.25 suggests upside potential from its current price of 327.11 USD, while IPGP’s consensus of 94 also indicates a bullish outlook compared to its present price of 77.54 USD.
Analyst Opinions Comparison
This section compares analysts’ ratings and grades for Taiwan Semiconductor Manufacturing Company Limited (TSM) and IPG Photonics Corporation (IPGP):
Rating Comparison
TSM Rating
- Rated A- with a very favorable overall assessment.
- Discounted Cash Flow Score is 5, indicating very favorable valuation.
- Return on Equity Score is 5, reflecting very efficient profit generation.
- Return on Assets Score is 5, demonstrating very effective asset utilization.
- Debt To Equity Score is 3, showing moderate financial risk.
- Overall Score is 4, considered favorable by analysts.
IPGP Rating
- Rated B+ with a very favorable overall assessment.
- Discounted Cash Flow Score is 4, indicating favorable valuation.
- Return on Equity Score is 2, showing moderate efficiency in profit generation.
- Return on Assets Score is 3, suggesting moderate asset utilization.
- Debt To Equity Score is 4, indicating favorable financial stability.
- Overall Score is 3, considered moderate by analysts.
Which one is the best rated?
Based strictly on the provided data, TSM holds a stronger position with a higher overall score (4 vs. 3) and superior scores in discounted cash flow, return on equity, and return on assets. IPGP has a better debt-to-equity score but lower profitability and asset utilization scores.
Scores Comparison
The scores comparison between Taiwan Semiconductor Manufacturing Company Limited (TSM) and IPG Photonics Corporation (IPGP) is as follows:
TSM Scores
- Altman Z-Score: 2.94, in the grey zone with moderate risk of bankruptcy.
- Piotroski Score: 8, indicating very strong financial health.
IPGP Scores
- Altman Z-Score: 9.65, in the safe zone with low bankruptcy risk.
- Piotroski Score: 7, indicating strong financial health.
Which company has the best scores?
IPGP has a significantly higher Altman Z-Score, placing it in the safe zone, while TSM falls into the grey zone. TSM, however, has a stronger Piotroski Score than IPGP. Overall, IPGP shows lower bankruptcy risk, with TSM having slightly stronger financial strength.
Grades Comparison
Here is a detailed comparison of recent grades assigned by reputable grading companies for the two companies:
Taiwan Semiconductor Manufacturing Company Limited Grades
The following table shows the recent grades from major financial institutions for TSM:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Bernstein | Maintain | Outperform | 2025-12-08 |
| Needham | Maintain | Buy | 2025-10-27 |
| Barclays | Maintain | Overweight | 2025-10-17 |
| Needham | Maintain | Buy | 2025-10-16 |
| Susquehanna | Maintain | Positive | 2025-10-10 |
| Barclays | Maintain | Overweight | 2025-10-09 |
| Barclays | Maintain | Overweight | 2025-09-16 |
| Needham | Maintain | Buy | 2025-07-17 |
| Susquehanna | Maintain | Positive | 2025-07-14 |
| Needham | Maintain | Buy | 2025-07-01 |
Overall, TSM’s grades show a consistent “Buy” or equivalent positive rating trend from multiple respected analysts, with no downgrades or negative outlooks in the last year.
IPG Photonics Corporation Grades
The table below summarizes recent grades from recognized grading companies for IPGP:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Citigroup | Upgrade | Buy | 2025-11-05 |
| Bernstein | Upgrade | Outperform | 2025-08-07 |
| Raymond James | Maintain | Strong Buy | 2025-05-07 |
| CL King | Upgrade | Buy | 2025-03-18 |
| Citigroup | Maintain | Sell | 2025-02-18 |
| Stifel | Maintain | Buy | 2025-02-12 |
| Needham | Maintain | Hold | 2025-02-12 |
| Seaport Global | Downgrade | Neutral | 2024-08-01 |
| Stifel | Maintain | Buy | 2024-07-31 |
| Raymond James | Maintain | Strong Buy | 2024-07-31 |
IPGP’s ratings reveal more mixed opinions, ranging from “Sell” to “Strong Buy,” with several upgrades recently but also a few hold and neutral assessments.
Which company has the best grades?
TSM exhibits a steadier and more uniform buy-side consensus compared to IPGP’s wider grade dispersion and occasional sell ratings. Investors might view TSM’s consistent positive outlook as a sign of stable analyst confidence, while IPGP’s mixed grades suggest more varied market expectations and potential volatility in sentiment.
Strengths and Weaknesses
Below is a comparison of key strengths and weaknesses between Taiwan Semiconductor Manufacturing Company Limited (TSM) and IPG Photonics Corporation (IPGP) based on the most recent data.
| Criterion | Taiwan Semiconductor Manufacturing Company Limited (TSM) | IPG Photonics Corporation (IPGP) |
|---|---|---|
| Diversification | Strong focus on wafer production with solid other product lines (379B TWD in 2024) | Diverse laser product segments but heavy reliance on amplifiers and CW lasers |
| Profitability | High net margin (40.0%), ROIC at 20.0%, favorable ratios overall | Negative net margin (-18.58%), negative ROIC (-9.97%), unfavorable profitability ratios |
| Innovation | Consistent value creation, though ROIC shows a declining trend | Value destruction with sharply declining ROIC, indicating challenges in innovation or market position |
| Global presence | Leading global semiconductor foundry with extensive international footprint | Global laser systems supplier but smaller scale and less dominant market position |
| Market Share | Dominant wafer foundry with large and growing revenue base (>1.9T TWD wafers in 2022) | Niche but competitive laser market with smaller revenue (~$330M for high power CW lasers in 2024) |
Key takeaways: TSM demonstrates strong profitability and a dominant market position despite a slight decline in ROIC, suggesting resilience and value creation. IPGP struggles with profitability and value destruction, signaling caution for investors due to operational challenges and declining returns.
Risk Analysis
Below is a comparative risk table for Taiwan Semiconductor Manufacturing Company Limited (TSM) and IPG Photonics Corporation (IPGP) based on the most recent data from 2024 and market conditions in 2026:
| Metric | Taiwan Semiconductor Manufacturing Company Limited (TSM) | IPG Photonics Corporation (IPGP) |
|---|---|---|
| Market Risk | Beta 1.27, moderate volatility due to global semiconductor cycle sensitivity | Beta 1.02, relatively stable but exposed to niche laser markets |
| Debt level | Low debt-to-equity 0.25, debt-to-assets 15.65%, strong interest coverage | Very low debt 0.01 debt-to-equity, minimal financial risk |
| Regulatory Risk | High due to Taiwan-China geopolitical tensions impacting supply chain | Moderate, US-based with standard regulatory environment |
| Operational Risk | Complex global manufacturing with high technology demands | Moderate, dependent on advanced fiber laser tech and supply chain |
| Environmental Risk | Moderate; semiconductor manufacturing has notable environmental impact | Low to moderate, laser manufacturing has limited environmental footprint |
| Geopolitical Risk | High, given Taiwan location and global trade tensions | Low, US-based with less direct geopolitical exposure |
Synthesis: TSM faces the most significant risks from geopolitical tensions and market cyclicality, which can heavily impact its global supply chain and revenue. IPGP’s main risks stem from operational dependency on specialized technology, though it has a stronger financial position with minimal debt. Investors should weigh TSM’s exposure to geopolitical instability against its leading market position and favorable financial health.
Which Stock to Choose?
Taiwan Semiconductor Manufacturing Company Limited (TSM) shows strong income growth with a 33.9% revenue increase in 2024 and favorable profitability metrics, including a 40.02% net margin and 27.29% ROE. Its debt levels are low and well managed, supported by a solid current ratio of 2.36. The company holds a very favorable A- rating and a slightly favorable moat status despite a declining ROIC trend.
IPG Photonics Corporation (IPGP) experienced declining income, with a 24.1% revenue drop in 2024 and an unfavorable net margin of -18.58%. Financial ratios reflect challenges, showing negative returns on equity and invested capital, though debt remains minimal. The firm holds a favorable B+ rating but a very unfavorable moat status due to significant value destruction and declining profitability.
Investors focused on stability and strong profitability might find TSM’s favorable rating and robust income evolution more attractive, while those with a tolerance for volatility and interest in turnaround potential could view IPGP’s lower valuation metrics and moderate rating as areas to watch. The choice might depend on whether an investor prioritizes consistent value creation or is open to higher risk profiles.
Disclaimer: Investment carries a risk of loss of initial capital. The past performance is not a reliable indicator of future results. Be sure to understand risks before making an investment decision.
Go Further
I encourage you to read the complete analyses of Taiwan Semiconductor Manufacturing Company Limited and IPG Photonics Corporation to enhance your investment decisions:
