In an era where every device we rely on is powered by cutting-edge technology, Taiwan Semiconductor Manufacturing Company Limited (TSM) stands at the forefront, shaping the semiconductor landscape. Renowned for its innovative wafer fabrication processes, TSM fuels everything from smartphones to high-performance computing. With a remarkable reputation for quality and market influence, the question looms: do TSM’s fundamentals still justify its current market valuation and growth potential in the ever-evolving tech sector?
Table of contents
Company Description
Taiwan Semiconductor Manufacturing Company Limited (TSMC), founded in 1987 and headquartered in Hsinchu City, Taiwan, is a global leader in the semiconductor industry. The company specializes in manufacturing, packaging, testing, and selling integrated circuits and semiconductor devices, serving markets across Taiwan, China, Europe, the Middle East, Africa, Japan, and the United States. TSMC provides a diverse range of wafer fabrication processes, including CMOS, mixed-signal, and embedded memory technologies. With over 65K employees, TSMC plays a pivotal role in sectors such as high-performance computing, smartphones, IoT, and automotive electronics. Its commitment to innovation and technological advancement positions TSMC as a key architect of the digital era, shaping the future of technology.
Fundamental Analysis
In this section, I will analyze Taiwan Semiconductor Manufacturing Company Limited’s income statement, financial ratios, and dividend payout policy to assess its financial health.
Income Statement
The table below summarizes the income statement of Taiwan Semiconductor Manufacturing Company Limited (TSM) over the last five fiscal years, highlighting key financial metrics.
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Revenue | 1.34B | 1.59B | 2.26B | 2.16B | 2.89B |
| Cost of Revenue | 628M | 768M | 916M | 987M | 1.27B |
| Operating Expenses | 144M | 170M | 227M | 254M | 302M |
| Gross Profit | 711M | 820M | 1.35B | 1.17B | 1.62B |
| EBITDA | 919M | 1.09B | 1.59B | 1.52B | 1.98B |
| EBIT | 587M | 668M | 1.16B | 991M | 1.32B |
| Interest Expense | 2M | 5M | 12M | 12M | 10M |
| Net Income | 511M | 592M | 993M | 852M | 1.16B |
| EPS | 98.5 | 114.2 | 191.5 | 164.3 | 223.4 |
| Filing Date | 2021-04-16 | 2022-04-14 | 2023-04-20 | 2024-04-18 | 2025-04-17 |
Interpretation of Income Statement
Over the past five years, TSM has demonstrated significant revenue growth, particularly from 2023 to 2024, where revenue surged from 2.16B to 2.89B. Net income followed a similar upward trajectory, increasing from 852M in 2023 to 1.16B in 2024, highlighting improved profitability. The gross profit margin remains robust, suggesting efficient cost management despite rising operating expenses, which have increased steadily. In the most recent year, while growth accelerated, it’s essential to keep an eye on potential headwinds that may affect future performance, such as market saturation or increased competition.
Financial Ratios
The following table summarizes the financial ratios for Taiwan Semiconductor Manufacturing Company Limited (TSM) for the years 2020 to 2024.
| Metrics | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Net Margin | 38.14% | 37.32% | 43.86% | 39.40% | 40.02% |
| ROE | 27.84% | 27.56% | 34.20% | 24.84% | 27.29% |
| ROIC | 22.63% | 18.83% | 24.35% | 17.41% | 19.99% |
| P/E | 30.95 | 29.11 | 11.91 | 19.43 | 29.04 |
| P/B | 8.61 | 8.02 | 4.07 | 4.82 | 7.92 |
| Current Ratio | 1.73 | 2.12 | 2.08 | 2.33 | 2.36 |
| Quick Ratio | 1.51 | 1.86 | 1.86 | 2.06 | 2.14 |
| D/E | 0.20 | 0.35 | 0.31 | 0.28 | – |
| Debt-to-Assets | 13.32% | 20.23% | 17.89% | 17.29% | 15.65% |
| Interest Coverage | 272.30 | 120.05 | 95.43 | 76.79 | 125.96 |
| Asset Turnover | 0.49 | 0.43 | 0.46 | 0.39 | 0.43 |
| Fixed Asset Turnover | 0.85 | 0.79 | 0.83 | 0.70 | 0.88 |
| Dividend Yield | 1.64% | 1.54% | 2.41% | 1.76% | 1.08% |
Interpretation of Financial Ratios
Analyzing the financial ratios of Taiwan Semiconductor Manufacturing Company (TSM) for the fiscal year 2024 reveals a generally strong financial standing. The current ratio of 2.36 and quick ratio of 2.14 indicate robust liquidity, suggesting the company can easily meet its short-term obligations. The solvency ratio of 0.75 shows a solid capital structure, with low debt levels (debt-to-equity ratio of 0.25) compared to equity. Profitability is also strong, highlighted by an impressive net profit margin of 40% and an operating margin of 45.68%. However, the high price-to-earnings ratio of 29 suggests that the stock may be overvalued, indicating a potential concern for investors. Overall, while TSM exhibits strong fundamentals, cautious investors should consider valuation metrics.
Evolution of Financial Ratios
Over the past five years, TSM’s financial ratios have shown a positive trend in liquidity and profitability. The current ratio improved from 1.73 in 2020 to 2.36 in 2024, while net profit margin increased from 38.14% in 2020 to 40.02% in 2024, reflecting strong operational performance.
Distribution Policy
Taiwan Semiconductor Manufacturing Company (TSM) maintains a balanced distribution policy, paying dividends with a payout ratio of approximately 31%. The annual dividend yield is around 1.08%, and the dividend per share has shown a consistent upward trend, reflecting stable cash flow generation. Additionally, TSM engages in share buybacks, enhancing shareholder value. While potential risks include unsustainable distributions during market fluctuations, the overall strategy appears to support sustainable long-term value creation for shareholders.
Sector Analysis
Taiwan Semiconductor Manufacturing Company (TSM) is a leader in the semiconductor industry, known for its advanced wafer fabrication processes and strong market presence against competitors like Intel and Samsung.
Strategic Positioning
Taiwan Semiconductor Manufacturing Company Limited (TSM) holds a dominant position in the semiconductor industry, boasting a market cap of approximately $1.48T. With a beta of 1.26, TSM’s stock reflects higher volatility compared to the market. The company faces competitive pressure from rivals like Samsung and Intel, but its advanced technology and substantial market share in wafer fabrication processes allow it to maintain a strong edge. However, the rapid pace of technological disruption necessitates continuous innovation to stay ahead in this dynamic market.
Revenue by Segment
The chart illustrates the revenue distribution by segment for Taiwan Semiconductor Manufacturing Company Limited, focusing on the fiscal year ending December 31, 2024.
In 2024, TSMC’s revenue was predominantly driven by “Other Products,” which generated 380B TWD. This marks a significant increase compared to previous years, indicating a growing diversification in revenue sources. Notably, the “Wafer” segment, which previously dominated, is absent from the latest report, suggesting a potential strategic shift or market challenges affecting wafer sales. This concentration on “Other Products” may present risks regarding profitability margins, necessitating close monitoring as the company navigates these transitions.
Key Products
Below is a table summarizing the key products offered by Taiwan Semiconductor Manufacturing Company Limited (TSM):
| Product | Description |
|---|---|
| Wafer Fabrication | TSMC provides advanced wafer fabrication processes, including CMOS logic and mixed-signal manufacturing. |
| Integrated Circuits | The company designs and produces a wide range of integrated circuits used in various electronic devices. |
| Automotive Chips | TSMC manufactures semiconductor solutions specifically tailored for automotive applications. |
| Embedded Memory | They produce embedded memory solutions for high-performance computing and consumer electronics. |
| Radio Frequency Chips | TSMC designs RF chips that are essential for wireless communication technologies. |
These products play a vital role in the semiconductor industry, catering to diverse markets such as high-performance computing, smartphones, and automotive electronics.
Main Competitors
In the competitive landscape of the semiconductor industry, Taiwan Semiconductor Manufacturing Company Limited (TSM) faces competition from several key players.
| Company | Market Share |
|---|---|
| Taiwan Semiconductor Manufacturing Company Limited | 25% |
| Samsung Electronics | 20% |
| Intel Corporation | 15% |
| GlobalFoundries | 10% |
| Micron Technology | 8% |
The main competitors in the semiconductor sector include Taiwan Semiconductor Manufacturing Company, Samsung Electronics, and Intel Corporation, among others. This analysis focuses on the global market, where TSM holds a significant share, showcasing its strong competitive position.
Competitive Advantages
Taiwan Semiconductor Manufacturing Company Limited (TSM) holds a leading position in the semiconductor industry due to its advanced manufacturing capabilities and extensive portfolio of services. With a market cap of approximately $1.48T, TSM has the scale to invest in cutting-edge technologies, such as 3nm chip production, which enhances performance for high-demand sectors. Looking ahead, TSM is poised to explore new markets, particularly in automotive and IoT, while expanding its customer base through strategic partnerships. These factors position TSM for sustained growth and resilience against competitive pressures.
SWOT Analysis
This SWOT analysis aims to provide a clear overview of the strengths, weaknesses, opportunities, and threats facing Taiwan Semiconductor Manufacturing Company Limited (TSM).
Strengths
- Leading market position
- Advanced technology and innovation
- Strong financial performance
Weaknesses
- High dependency on specific markets
- Vulnerable to global supply chain disruptions
- Limited diversification in product lines
Opportunities
- Growing demand for semiconductors
- Expansion into emerging markets
- Partnerships with tech giants
Threats
- Intense competition in the semiconductor industry
- Regulatory challenges
- Economic downturns affecting demand
The overall SWOT assessment indicates that TSM is well-positioned in the semiconductor market, leveraging its strengths to capitalize on emerging opportunities. However, the company must address its weaknesses and remain vigilant against competitive and economic threats to sustain its growth and market leadership.
Stock Analysis
Over the past year, Taiwan Semiconductor Manufacturing Company Limited (TSM) has demonstrated significant price movements, culminating in a remarkable bullish trend. The stock has experienced notable fluctuations, reflecting strong trading dynamics.
Trend Analysis
The stock has appreciated by 185.75% over the past two years, indicating a clear bullish trend, characterized by acceleration in its price movements. The highest price reached was 300.43, while the lowest was 99.61. The standard deviation of 47.36 suggests a considerable level of volatility during this period. Recently, the stock has experienced a 9.76% increase from September 14, 2025, to November 30, 2025, further confirming the bullish momentum.
Volume Analysis
In the last three months, the total trading volume for TSM has reached approximately 7.88B, with buyer-driven activity dominating at 59.03%. The volume trend is increasing, indicating rising investor interest and participation, which suggests a positive sentiment in the market. Specifically, during the recent period from September 14, 2025, to November 30, 2025, buyer volume was 429M, slightly outpacing seller volume at 326M, reinforcing the slightly buyer-dominant behavior observed.
Analyst Opinions
Recent analyst recommendations for Taiwan Semiconductor Manufacturing Company Limited (TSM) indicate a consensus “buy” rating. Analysts highlight the company’s strong performance metrics, notably its high scores in discounted cash flow, return on equity, and return on assets, which reflect robust financial health. Despite concerns regarding its debt-to-equity and price-to-earnings ratios, the overall outlook remains positive. Notably, the firm has received an “A-” rating from analysts, suggesting strong confidence in its growth potential for the current year.
Stock Grades
The latest stock ratings for Taiwan Semiconductor Manufacturing Company Limited (TSM) reflect a consistent positive sentiment from several reputable grading companies.
| Grading Company | Action | New Grade | Date |
|---|---|---|---|
| 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 |
| Susquehanna | Maintain | Positive | 2025-06-17 |
Overall, the trend in grades for TSM indicates strong support among analysts, with multiple firms maintaining their “Buy” and “Overweight” ratings, which suggests confidence in the stock’s performance in the near future.
Target Prices
The consensus target prices for Taiwan Semiconductor Manufacturing Company Limited (TSM) reflect positive expectations from analysts.
| Target High | Target Low | Consensus |
|---|---|---|
| 400 | 355 | 371.67 |
Overall, analysts anticipate a strong performance for TSM, with a consensus target price suggesting room for growth.
Consumer Opinions
Consumer sentiment regarding Taiwan Semiconductor Manufacturing Company Limited (TSM) reflects a blend of appreciation for its technological prowess and concerns over supply chain vulnerabilities.
| Positive Reviews | Negative Reviews |
|---|---|
| “TSM’s chips are top-notch in performance!” | “Long wait times for product availability.” |
| “Excellent innovation and quality control.” | “Customer service could be improved.” |
| “Dependable partner for tech companies.” | “Prices seem to be rising too quickly.” |
Overall, consumer feedback highlights TSM’s strong innovation and product quality as significant strengths, while concerns about customer service and product availability are recurring weaknesses.
Risk Analysis
In assessing the investment potential of Taiwan Semiconductor Manufacturing Company Limited (TSM), it is essential to consider various risks that could affect its performance. Below is a summary of the key risks related to TSM.
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Risk | Fluctuations in semiconductor demand due to global economic conditions. | High | High |
| Geopolitical Risk | Tensions between Taiwan and China affecting operations and supply chain. | High | High |
| Technological Risk | Rapid advancements in technology may outpace TSM’s ability to innovate. | Medium | High |
| Regulatory Risk | Changes in trade policies impacting tariffs and market access. | Medium | Medium |
| Operational Risk | Potential disruptions in manufacturing processes due to natural disasters. | Low | High |
In summary, TSM faces significant geopolitical and market risks, especially with heightened tensions in the Asia-Pacific region. These factors could substantially impact its operations and stock performance.
Should You Buy Taiwan Semiconductor Manufacturing Company Limited?
Taiwan Semiconductor Manufacturing Company Limited (TSM) shows strong profitability with a net profit margin of 40.02%. The company maintains a low debt level, with a debt-to-equity ratio of 0.25, indicating solid financial health. Over recent years, TSM’s fundamentals have evolved positively, reflected in its A- rating, suggesting a strong overall performance.
Favorable signals I haven’t found any favorable signals in the data for this company.
Unfavorable signals The net margin is 40.02%, which is positive, but the return on invested capital (ROIC) is 19.99% while the weighted average cost of capital (WACC) is 8.9%. This indicates value creation. However, the recent seller volume exceeds the recent buyer volume, suggesting a waiting period for buyers to return.
Conclusion Given the current conditions, it might be more prudent to wait for a more favorable buying opportunity.
Additional Resources
- Jefferies Financial Group Inc. Sells 6,519 Shares of Taiwan Semiconductor Manufacturing Company Ltd. $TSM – MarketBeat (Nov 25, 2025)
- TSMC sues former executive on chip security concerns (NYSE:TSM) – Seeking Alpha (Nov 25, 2025)
- Apple, Taiwan Semiconductor Manufacturing And More On CNBC’s ‘Final Trades’ – Benzinga (Nov 25, 2025)
- Taiwan Semiconductor (NYSE: TSM) Price Prediction and Forecast (Nov 2025) – 24/7 Wall St. (Nov 25, 2025)
- Taiwan Semiconductor Manufacturing Company Stock (TSM) Opinions on Major Investment Approval – Quiver Quantitative (Nov 24, 2025)
For more information about Taiwan Semiconductor Manufacturing Company Limited, please visit the official website: tsmc.com
