In the dynamic semiconductor industry, Taiwan Semiconductor Manufacturing Company Limited (TSM) and ON Semiconductor Corporation (ON) stand out as influential players shaping technology’s future. Both companies specialize in semiconductor solutions but differ in scale, market focus, and innovation strategies. This analysis will compare their strengths and risks, helping you decide which company aligns better with your investment goals in this competitive sector. Let’s explore which could be the smarter addition to your portfolio.
Table of contents
Companies Overview
I will begin the comparison between Taiwan Semiconductor Manufacturing Company Limited and ON Semiconductor 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) operates as a leading semiconductor manufacturer, producing integrated circuits and various semiconductor devices globally. Founded in 1987 and headquartered in Hsinchu City, Taiwan, TSMC offers diverse wafer fabrication processes and supports high-performance computing, smartphones, automotive, and digital consumer electronics markets. It also provides customer engineering support and invests in technology startups.
ON Semiconductor Corporation Overview
ON Semiconductor Corporation (ON) specializes in intelligent sensing and power solutions, focusing on electrification in automotive and sustainable energy sectors. Founded in 1992 and based in Scottsdale, Arizona, ON develops analog, mixed-signal, and advanced logic semiconductor products across three segments: Power Solutions, Advanced Solutions, and Intelligent Sensing. The company supports applications like electric vehicles, solar energy, and industrial power systems worldwide.
Key similarities and differences
Both TSM and ON operate in the semiconductor industry with a focus on advanced technology and global markets. TSMC primarily manufactures wafers and integrated circuits for various electronics, while ON emphasizes intelligent power and sensing solutions, particularly for automotive electrification and sustainable energy. TSMC’s business is centered on wafer fabrication and broad semiconductor manufacturing, whereas ON’s model integrates product design with specialized semiconductor applications across multiple segments.
Income Statement Comparison
The following table compares key income statement metrics for Taiwan Semiconductor Manufacturing Company Limited (TSM) and ON Semiconductor Corporation (ON) for the most recent fiscal year 2024.
| Metric | Taiwan Semiconductor Manufacturing Company Limited (TSM) | ON Semiconductor Corporation (ON) |
|---|---|---|
| Market Cap | 1.7T TWD | 24.8B USD |
| Revenue | 2.89T TWD | 7.08B USD |
| EBITDA | 1.98T TWD | 2.54B USD |
| EBIT | 1.32T TWD | 1.90B USD |
| Net Income | 1.16T TWD | 1.57B USD |
| EPS | 223.4 TWD | 3.68 USD |
| Fiscal Year | 2024 | 2024 |
Income Statement Interpretations
Taiwan Semiconductor Manufacturing Company Limited
Taiwan Semiconductor Manufacturing Company Limited (TSM) showed strong revenue growth from 2020 to 2024, increasing from 1.34T TWD to 2.89T TWD, with net income rising from 510B TWD to 1.16T TWD. Margins remained robust, with a gross margin of 56.12% in 2024, and net margin stable around 40%. The latest year saw revenue growth accelerate by 33.9%, with net income and EPS also significantly improving.
ON Semiconductor Corporation
ON Semiconductor Corporation (ON) experienced overall revenue growth over five years, from 5.26B USD in 2020 to 7.08B USD in 2024, though revenue declined by 14.2% in the last year. Net income soared over the period to 1.57B USD, despite a 28% drop in EBIT in 2024. Margins were favorable but lower than TSM’s, with a 22.2% net margin in 2024 and a recent decrease in profitability and EPS growth.
Which one has the stronger fundamentals?
TSM exhibits stronger fundamental metrics with consistently higher margins, significant year-over-year revenue and earnings growth, and stable cost control. ON shows impressive long-term net income growth but faces recent declines in revenue and profitability margins. While both are rated favorably overall, TSM’s financial stability and margin strength indicate more resilient income statement fundamentals.
Financial Ratios Comparison
Below is a comparison of key financial ratios for Taiwan Semiconductor Manufacturing Company Limited (TSM) and ON Semiconductor Corporation (ON) based on their latest fiscal year data.
| Ratios | Taiwan Semiconductor Manufacturing Company Limited (TSM) | ON Semiconductor Corporation (ON) |
|---|---|---|
| ROE | 27.3% | 17.9% |
| ROIC | 20.0% | 11.9% |
| P/E | 29.0 | 17.1 |
| P/B | 7.9 | 3.1 |
| Current Ratio | 2.36 | 5.06 |
| Quick Ratio | 2.14 | 3.38 |
| D/E (Debt-to-Equity) | 0.25 | 0.38 |
| Debt-to-Assets | 15.6% | 23.9% |
| Interest Coverage | 126 | 28.4 |
| Asset Turnover | 0.43 | 0.50 |
| Fixed Asset Turnover | 0.88 | 1.61 |
| Payout Ratio | 31.3% | 0% |
| Dividend Yield | 1.08% | 0% |
Interpretation of the Ratios
Taiwan Semiconductor Manufacturing Company Limited
TSMC displays strong profitability with a 40.02% net margin and a 27.29% return on equity, signaling efficient capital use. Its leverage and liquidity ratios are favorable, but valuation multiples like P/E and P/B appear high, which could concern value-focused investors. The company pays dividends with a 1.08% yield, showing a balanced payout supported by solid free cash flow.
ON Semiconductor Corporation
ON Semiconductor shows favorable profitability ratios, including a 22.21% net margin and 17.88% ROE, but its weighted average cost of capital at 10.12% is unfavorable. The firm’s dividend yield is zero, reflecting no dividend payouts, possibly due to reinvestment needs or growth strategies. Liquidity and leverage ratios are mixed, with a very high current ratio deemed unfavorable.
Which one has the best ratios?
TSMC holds a more favorable overall ratio profile, with 57.14% favorable metrics compared to ON’s 50%. TSMC’s higher returns, strong liquidity, and dividend payments contrast with ON’s mixed liquidity and absence of dividends, making TSMC’s financial ratios comparatively stronger in this assessment.
Strategic Positioning
This section compares the strategic positioning of Taiwan Semiconductor Manufacturing Company Limited (TSM) and ON Semiconductor Corporation (ON), covering Market position, Key segments, and Exposure to technological disruption:
Taiwan Semiconductor Manufacturing Company Limited (TSM)
- Leading global semiconductor foundry with significant scale and strong competitive pressure in wafer fabrication.
- Key segment is wafer fabrication with products for high performance computing, smartphones, IoT, automotive, and consumer electronics.
- Exposure to rapid technological advances; invests in technology startups and advanced wafer fabrication processes to maintain edge.
ON Semiconductor Corporation (ON)
- Mid-sized semiconductor provider focused on power and sensing solutions, facing competitive pressure in analog and power segments.
- Diverse segments: Power Solutions, Analog Solutions, and Intelligent Sensing, driving growth in automotive electrification and sustainable energy.
- Technological disruption mainly in intelligent power and sensing innovations, supporting automotive electrification and energy efficiency trends.
TSM vs ON Positioning
TSM adopts a concentrated strategy focused on wafer fabrication at scale, benefiting from global reach and advanced technology. ON pursues diversification across multiple semiconductor segments, leveraging growth in automotive and sustainable energy. TSM’s scale offers production advantages; ON’s diversity targets emerging markets.
Which has the best competitive advantage?
TSM shows a slightly favorable moat by creating value with a declining ROIC trend, indicating established competitive strength but some profitability pressure. ON also has a slightly favorable moat with growing ROIC, reflecting improving profitability yet lacking a clear competitive advantage.
Stock Comparison
The stock prices of Taiwan Semiconductor Manufacturing Company Limited and ON Semiconductor Corporation have shown contrasting dynamics over the past 12 months, with significant divergence in overall trends and recent trading momentum.
Trend Analysis
Taiwan Semiconductor Manufacturing Company Limited’s stock exhibited a strong bullish trend over the past year with a 152.54% price increase and accelerating momentum, reaching a high of 327.11 and a low of 127.7. Recent months also show a positive 8.88% gain with moderate volatility.
ON Semiconductor Corporation’s stock followed a bearish trend over the same period, declining 20.49% despite acceleration and a high volatility of 11.97. However, recent performance shows a rebound with a 20.97% gain and a slightly buyer-dominant volume trend.
Comparing both stocks, Taiwan Semiconductor Manufacturing Company Limited delivered substantially higher market performance over the year, while ON Semiconductor showed recovery signs more recently but remains overall negative.
Target Prices
Analyst consensus target prices suggest moderate upside potential for both Taiwan Semiconductor Manufacturing Company Limited and ON Semiconductor Corporation.
| Company | Target High | Target Low | Consensus |
|---|---|---|---|
| Taiwan Semiconductor Manufacturing Company Limited | 400 | 330 | 361.25 |
| ON Semiconductor Corporation | 64 | 51 | 58.33 |
For TSM, the consensus target price of 361.25 USD exceeds the current price of 327.11 USD, indicating positive analyst expectations. ON’s target consensus at 58.33 USD is slightly below its current price of 60.58 USD, suggesting a neutral to mildly cautious outlook.
Analyst Opinions Comparison
This section compares analysts’ ratings and financial scores for Taiwan Semiconductor Manufacturing Company Limited (TSM) and ON Semiconductor Corporation (ON):
Rating Comparison
TSM Rating
- Rating: A-, considered very favorable by analysts.
- Discounted Cash Flow Score: 5, indicating a very favorable valuation based on future cash flow.
- ROE Score: 5, showing very efficient profit generation from shareholders’ equity.
- ROA Score: 5, very favorable, indicating excellent asset utilization to generate earnings.
- Debt To Equity Score: 3, moderate financial risk with balanced debt to equity levels.
- Overall Score: 4, a favorable overall financial standing.
ON Rating
- Rating: B-, also considered very favorable but lower than TSM.
- Discounted Cash Flow Score: 3, a moderate score suggesting less favorable valuation.
- ROE Score: 2, a moderate score reflecting lower efficiency in generating equity returns.
- ROA Score: 3, moderate asset utilization performance.
- Debt To Equity Score: 2, moderate but slightly better financial risk profile than TSM.
- Overall Score: 2, reflecting a moderate overall financial standing.
Which one is the best rated?
Based strictly on the provided data, TSM holds a higher overall rating (A-) and superior scores in discounted cash flow, ROE, and ROA compared to ON, which has a B- rating and generally moderate scores. TSM is clearly better rated by analysts.
Scores Comparison
The comparison of Altman Z-Score and Piotroski Score for TSM and ON is as follows:
TSM Scores
- Altman Z-Score: 2.94, in the grey zone indicating moderate risk
- Piotroski Score: 8, very strong financial health
ON Scores
- Altman Z-Score: 4.84, in the safe zone indicating low bankruptcy risk
- Piotroski Score: 6, average financial strength
Which company has the best scores?
ON shows a stronger Altman Z-Score in the safe zone, indicating lower bankruptcy risk. TSM has a higher Piotroski Score, suggesting stronger financial health. Each company performs better in one of the two scores.
Grades Comparison
Here is a comparison of the latest reliable grades for Taiwan Semiconductor Manufacturing Company Limited and ON Semiconductor Corporation:
Taiwan Semiconductor Manufacturing Company Limited Grades
This table shows recent grades and recommendations from reputable grading companies 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 |
The grades for TSM are consistently positive, with major firms maintaining Buy, Outperform, and Overweight ratings over the past year.
ON Semiconductor Corporation Grades
This table shows recent grades and recommendations from reputable grading companies for ON Semiconductor:
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| Piper Sandler | Maintain | Overweight | 2026-01-07 |
| Truist Securities | Maintain | Hold | 2025-12-19 |
| Morgan Stanley | Maintain | Equal Weight | 2025-11-24 |
| Truist Securities | Maintain | Hold | 2025-11-04 |
| Baird | Maintain | Neutral | 2025-11-04 |
| Rosenblatt | Maintain | Neutral | 2025-11-04 |
| Morgan Stanley | Maintain | Equal Weight | 2025-11-04 |
| TD Cowen | Maintain | Buy | 2025-11-04 |
| UBS | Maintain | Neutral | 2025-10-27 |
| B of A Securities | Maintain | Neutral | 2025-09-05 |
ON Semiconductor’s grades are mixed, ranging from Buy and Overweight to Hold, Neutral, and Equal Weight, indicating a more cautious outlook.
Which company has the best grades?
Taiwan Semiconductor Manufacturing Company Limited holds better and more consistent grades, predominantly Buy and Outperform, compared to ON Semiconductor’s mixed ratings. This suggests stronger analyst confidence in TSM, potentially impacting investor sentiment toward steadier growth prospects.
Strengths and Weaknesses
Below is a comparative overview of Taiwan Semiconductor Manufacturing Company Limited (TSM) and ON Semiconductor Corporation (ON) across key criteria.
| Criterion | Taiwan Semiconductor Manufacturing Company Limited (TSM) | ON Semiconductor Corporation (ON) |
|---|---|---|
| Diversification | Primarily focused on wafer fabrication with some other products; limited diversification | Broad product portfolio: Power Solutions, Analog Solutions, Intelligent Sensing |
| Profitability | High net margin (40.0%), ROIC 20.0%, strong ROE (27.3%) | Moderate net margin (22.2%), ROIC 11.9%, ROE 17.9% |
| Innovation | Leading-edge wafer tech, but ROIC trend declining (-10.4%) | Improving profitability and ROIC growth (+156.1%) indicates rising innovation impact |
| Global presence | Very strong global player in semiconductor manufacturing | Growing global footprint but smaller scale than TSM |
| Market Share | Dominant in semiconductor foundry market | Significant in power and analog semiconductor segments |
Key takeaways: TSM excels in profitability and global leadership but shows a declining return on invested capital trend, signaling caution. ON demonstrates improving profitability and innovation growth, though with lower margins and less diversification. Both companies present slightly favorable moats with different risk and growth profiles.
Risk Analysis
Below is a comparative table highlighting key risks for Taiwan Semiconductor Manufacturing Company Limited (TSM) and ON Semiconductor Corporation (ON) based on the most recent 2024 data and 2026 market context:
| Metric | Taiwan Semiconductor Manufacturing Company Limited (TSM) | ON Semiconductor Corporation (ON) |
|---|---|---|
| Market Risk | Beta 1.274, exposed to global semiconductor cycle swings | Beta 1.543, higher volatility, US market focused |
| Debt level | Low debt-to-equity 0.25, very manageable | Moderate debt-to-equity 0.38, still under control |
| Regulatory Risk | Moderate, geopolitical tensions in Taiwan region | Moderate, US regulations on tech exports and trade |
| Operational Risk | High, complex manufacturing and supply chain dependencies | Moderate, diversified product segments reduce risk |
| Environmental Risk | Moderate, semiconductor manufacturing impacts environment | Moderate, focus on power efficiency but manufacturing footprint remains |
| Geopolitical Risk | High, Taiwan-China tensions critical for business continuity | Moderate, US-centric but affected by global trade issues |
The most impactful risks are geopolitical tensions for TSM, given its Taiwan base amid rising regional conflicts, and market volatility for ON, which has a higher beta and exposure to US tech sector fluctuations. Both companies maintain manageable debt levels, but TSM’s operational complexity and geopolitical exposure warrant cautious monitoring.
Which Stock to Choose?
Taiwan Semiconductor Manufacturing Company Limited (TSM) shows strong income growth with a 33.89% revenue increase in 2024 and favorable profitability metrics, including a 40.02% net margin and 27.29% ROE. Its debt ratios are low, and it holds a very favorable A- rating, with mostly favorable financial ratios despite some valuation concerns.
ON Semiconductor Corporation (ON) experienced a 14.19% revenue decline in 2024, though its long-term net income growth remains robust. Profitability ratios like a 22.21% net margin and 17.88% ROE are favorable. Its debt profile is moderate, and it holds a very favorable B- rating with a slightly favorable overall ratio evaluation.
Considering ratings and financial evaluations, TSM could appear more suitable for investors prioritizing quality and stable growth, while ON might be interpreted as appealing to those with a tolerance for volatility and a focus on potential turnaround opportunities, given its improving profitability trend.
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 ON Semiconductor Corporation to enhance your investment decisions:
