In an era where technology defines our daily lives, Taiwan Semiconductor Manufacturing Company Limited (TSMC) stands at the forefront of innovation, powering everything from smartphones to cutting-edge automotive systems. As the backbone of the semiconductor industry, TSMC not only leads with its advanced manufacturing processes and commitment to quality, but also shapes the future of technology through strategic investments and partnerships. As we delve into an investment analysis, it’s essential to question whether TSMC’s robust fundamentals continue to justify its market valuation and growth potential in an ever-evolving landscape.
Table of contents
Company Description
Taiwan Semiconductor Manufacturing Company Limited (TSMC), established in 1987 and headquartered in Hsinchu City, Taiwan, is a leading player in the semiconductor industry. As the world’s largest dedicated independent semiconductor foundry, TSMC specializes in manufacturing integrated circuits and a variety of semiconductor devices. With a strong presence in key global markets including the United States, Europe, and Asia, the company offers advanced wafer fabrication processes for diverse applications such as high-performance computing, smartphones, and automotive electronics. TSMC’s commitment to innovation and technology development positions it as a pivotal force in shaping the semiconductor landscape, driving advancements that underpin modern digital experiences.
Fundamental Analysis
In this section, I will delve into the fundamental analysis of Taiwan Semiconductor Manufacturing Company Limited (TSM), focusing on its income statement, key ratios, and payout policy to provide a comprehensive view of its financial health.
Income Statement
Below is the income statement for Taiwan Semiconductor Manufacturing Company Limited (TSM) over the past five years.
| Income Statement Metrics | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Revenue | 1.34B | 1.59B | 2.26B | 2.16B | 2.89B |
| Cost of Revenue | 0.63B | 0.77B | 0.92B | 0.99B | 1.27B |
| Operating Expenses | 0.14B | 0.17B | 0.23B | 0.25B | 0.30B |
| Gross Profit | 0.71B | 0.82B | 1.35B | 1.17B | 1.62B |
| EBITDA | 0.92B | 1.09B | 1.59B | 1.52B | 1.98B |
| EBIT | 0.57B | 0.65B | 1.12B | 0.92B | 1.32B |
| Interest Expense | 0.02B | 0.01B | 0.01B | 0.01B | 0.01B |
| Net Income | 0.51B | 0.59B | 0.99B | 0.85B | 1.16B |
| EPS | 98.5 | 114.2 | 191.5 | 164.2 | 223.4 |
| Filing Date | 2021-04-16 | 2022-04-14 | 2023-04-20 | 2024-04-18 | 2025-04-17 |
Over the last five years, TSM has shown a robust growth trajectory in both revenue and net income, with revenue increasing from 1.34 trillion TWD in 2020 to an impressive 2.89 trillion TWD in 2024. Net income has similarly grown, reaching 1.16 trillion TWD in 2024, reflecting strong operational performance and margin stability. In the most recent year, while revenue growth accelerated, net income growth was notable, suggesting improved efficiency and profit margins, despite slight fluctuations in operating expenses. This trend positions TSM favorably for continued investor interest.
Financial Ratios
Below is a table summarizing the financial ratios for Taiwan Semiconductor Manufacturing Company Limited (TSM) over the last few years.
| Ratios | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Net Margin | 38.14% | 37.32% | 43.86% | 38.79% | 40.02% |
| ROE | 27.84% | 27.56% | 34.20% | 24.45% | 27.29% |
| ROIC | 26.63% | 21.91% | 28.19% | 20.07% | 24.56% |
| P/E | 26.91 | 26.92 | 11.71 | 18.34 | 24.06 |
| P/B | 7.49 | 7.42 | 4.01 | 4.48 | 6.57 |
| 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 | 0.25 |
| 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 | 1.89% | 1.67% | 2.45% | 1.90% | 1.30% |
Interpretation of Financial Ratios
In 2024, TSM demonstrated strong financial health with a solid net margin of 40.02%, indicating effective cost control and profitability. The return on equity (ROE) of 27.29% and a robust interest coverage ratio of 125.96 suggest efficient use of capital and low debt-related risks. However, the P/E ratio of 24.06 may indicate that the stock is relatively expensive compared to earnings, warranting caution for potential investors.
Evolution of Financial Ratios
Over the past five years, TSM’s financial ratios depict a positive trend, particularly in net margin and ROE, indicating improved profitability and efficiency. However, the P/E ratio has significantly increased, suggesting that the stock may be becoming overvalued, which could heighten investment risks moving forward.
Distribution Policy
Taiwan Semiconductor Manufacturing Company Limited (TSM) maintains a balanced distribution policy, paying dividends with a current payout ratio of approximately 31.34%. The annual dividend yield stands at around 1.30%, reflecting a trend of steady distributions supported by healthy free cash flow coverage. Additionally, TSM engages in share buyback programs, which can enhance shareholder value. However, potential risks include reliance on market conditions, which could impact future distributions. Overall, TSM’s approach aligns with sustainable long-term value creation for shareholders.
Sector Analysis
Taiwan Semiconductor Manufacturing Company Limited (TSMC) is a leading player in the semiconductor industry, known for its advanced manufacturing processes and a diverse product range. Its competitive advantages include a strong market position and extensive technological expertise, while a SWOT analysis reveals strengths in innovation, weaknesses in capacity constraints, opportunities in emerging technologies, and threats from geopolitical tensions.
Strategic Positioning
Taiwan Semiconductor Manufacturing Company (TSM) holds a commanding position in the semiconductor market, boasting a significant market share thanks to its advanced wafer fabrication processes. The company’s technological capabilities are highly regarded, setting benchmarks for quality and innovation. However, TSM faces intense competitive pressure from rivals, particularly in the context of rapid technological advancements and potential disruptions within the industry. As the demand for high-performance computing and IoT devices continues to grow, maintaining its leadership position while navigating these challenges will be crucial for TSM’s sustained success.
Key Products
Below is a table summarizing the key products offered by Taiwan Semiconductor Manufacturing Company Limited (TSMC), highlighting their significance in the technology and semiconductor industry.
| Product | Description |
|---|---|
| CMOS Logic Circuits | These circuits are essential for digital devices, providing the foundation for processing and storage. |
| Mixed-Signal ICs | Integrated circuits that handle both analog and digital signals, crucial for applications like audio and communications. |
| Radio Frequency Chips | Used in wireless communication devices, these chips enable connectivity for smartphones and IoT devices. |
| Embedded Memory Solutions | Offers high-density memory solutions integrated within ICs, enhancing performance in various electronics. |
| Automotive Semiconductors | Specialized chips designed for automotive applications, including safety, navigation, and entertainment systems. |
| High-Performance Computing Chips | Tailored for demanding computational tasks, these chips support data centers and advanced computing applications. |
| Color Filters | Manufacturing color filters for displays, contributing to the visual quality of consumer electronics. |
| Technology Start-Up Investments | TSMC invests in emerging tech companies to foster innovation in semiconductor technologies. |
These products reflect TSMC’s commitment to maintaining its leadership in the semiconductor industry and meeting the diverse needs of its global customers.
Main Competitors
In the semiconductor industry, Taiwan Semiconductor Manufacturing Company Limited (TSM) faces competition from several key players. Below is a summary of the main competitors in the market, sorted by their market shares.
| Company | Market Share |
|---|---|
| Samsung Electronics Co., Ltd. | 18.3% |
| Intel Corporation | 15.2% |
| Taiwan Semiconductor Manufacturing Co. | 11.8% |
| SK Hynix Inc. | 9.4% |
| Micron Technology, Inc. | 7.6% |
These competitors primarily operate in the global semiconductor market, with significant shares in regions such as North America, Asia, and Europe. Samsung Electronics leads the market, leveraging its vast resources and innovative technology. Intel follows closely, known for its microprocessors, while TSMC remains a critical player due to its specialized foundry services.
Competitive Advantages
Taiwan Semiconductor Manufacturing Company Limited (TSM) holds substantial competitive advantages in the semiconductor industry due to its advanced manufacturing processes and extensive customer base. The company’s commitment to innovation positions it well for future opportunities, including the development of cutting-edge technologies in high-performance computing and artificial intelligence. Additionally, TSM is poised to expand into new markets, such as automotive and Internet of Things (IoT) applications, which are anticipated to drive significant growth. With its strong market presence and continuous investment in research and development, TSM is well-equipped to maintain its leadership position in the evolving semiconductor landscape.
SWOT Analysis
The purpose of this analysis is to evaluate the strengths, weaknesses, opportunities, and threats of Taiwan Semiconductor Manufacturing Company Limited (TSM) to assist in strategic decision-making.
Strengths
- Leading position in semiconductor manufacturing
- Strong financial performance
- Diverse product portfolio
Weaknesses
- High dependency on key customers
- Exposure to geopolitical tensions
- Capital-intensive industry
Opportunities
- Growing demand for advanced semiconductors
- Expansion into emerging markets
- Innovation in technology
Threats
- Intense competition in the semiconductor sector
- Supply chain disruptions
- Regulatory challenges in various regions
The overall SWOT assessment indicates that TSM possesses significant strengths and opportunities that could drive growth. However, the company must strategically manage its weaknesses and threats to sustain its competitive edge in the evolving semiconductor market.
Stock Analysis
Over the past year, Taiwan Semiconductor Manufacturing Company Limited (TSM) has experienced significant price movements, culminating in a remarkable bullish trend with a 179.45% increase. This analysis will provide insights into the stock’s price dynamics and trading activity.
Trend Analysis
Analyzing TSM’s stock over the past year, we see a substantial price change of 179.45%. The overall trend is classified as bullish, indicating a strong positive momentum in the stock’s performance. The highest price reached was $300.43, while the lowest was $99.61, demonstrating considerable volatility with a standard deviation of 46.88. Recently, from August 24, 2025, to November 9, 2025, the stock has continued to show a positive price change of 22.99%, alongside an upward trend slope of 6.37, suggesting acceleration in the bullish momentum.
Volume Analysis
Examining the trading volumes over the last three months, TSM has faced a bearish volume trend. The average trading volume for this period was 63.66M, with a buyer-dominant behavior observed in the recent analysis, where the average buy volume was 29.61M compared to an average sell volume of 34.06M. This indicates that seller activity has been predominant, which is reflected in the overall volume trend decreasing. The decrease in volume suggests a cautious investor sentiment, as market participation appears to be waning despite the stock’s bullish price trajectory.
Analyst Opinions
Recent analyst recommendations for Taiwan Semiconductor Manufacturing Company Limited (TSM) indicate a strong consensus for a “Buy” rating. Notably, on November 7, 2025, analysts rated TSM with an A- and a score of 4, highlighting its robust growth potential. Analysts emphasize the company’s strong performance metrics, particularly in DCF, ROE, and ROA, all rated as “Strong Buy.” However, concerns exist regarding its debt and price-to-earnings ratios, both rated as “Sell.” Overall, the consensus remains a solid “Buy” for TSM this year, indicating a favorable outlook for investors.
Stock Grades
Take a look at the latest evaluations of Taiwan Semiconductor Manufacturing Company Limited (TSM) as we assess its stock performance.
| 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 |
The recent stock grades indicate a strong consensus among analysts to maintain favorable ratings for TSM, with multiple firms reiterating their “Buy” and “Overweight” positions. This suggests confidence in the company’s prospects, making it a potential candidate for your investment portfolio. Always consider your risk tolerance and investment strategy before making decisions.
Target Prices
Understanding the target prices set by analysts can provide valuable insights into potential future performance for TSM.
| Target High | Target Low | Consensus |
|---|---|---|
| 400 | 355 | 371.67 |
The target prices indicate a positive outlook for TSM, with a consensus suggesting room for growth.
Consumer Opinions
Consumer sentiment regarding Taiwan Semiconductor Manufacturing Company Limited (TSM) showcases a mix of admiration for its technological prowess and concerns around market volatility.
| Positive Reviews | Negative Reviews |
|---|---|
| “TSM consistently delivers high-quality chips.” | “Stock price fluctuations make me nervous.” |
| “Their innovation keeps them ahead of competitors.” | “I wish their customer service was more responsive.” |
| “Strong growth potential in the semiconductor market.” | “Concerns over geopolitical tensions affecting supply.” |
| “Reliable partner for technology companies.” | “High dependence on a few major clients.” |
Overall, consumer feedback reflects strong appreciation for TSM’s technological leadership and growth potential, but concerns about stock volatility and dependence on a limited client base are frequently mentioned.
Risk Analysis
In assessing the investment potential of Taiwan Semiconductor Manufacturing Company Limited (TSM), it is vital to consider various risks that could impact its performance. Below is a table summarizing these risks.
| Category | Description | Probability | Impact |
|---|---|---|---|
| Market Risk | Volatility in global semiconductor demand due to economic fluctuations. | High | High |
| Geopolitical Risk | Tensions between Taiwan and China could disrupt operations and supply chains. | Medium | Very High |
| Technological Risk | Rapid technological advancements may outpace TSM’s ability to innovate. | High | Medium |
| Regulatory Risk | Changes in trade policies and regulations affecting semiconductor exports. | Medium | High |
The most pressing risks for TSM currently stem from geopolitical tensions, particularly with China, which pose significant threats to operations and market stability.
Should You Buy this company?
Taiwan Semiconductor Manufacturing Company Limited (TSM) has demonstrated solid financial performance with a net margin of 40.02%, a return on invested capital (ROIC) of 24.56%, and a weighted average cost of capital (WACC) of 8.96%. The company’s competitive advantages stem from its leading position in the semiconductor industry, but it faces recent risks such as increasing competition and potential supply chain disruptions.
Based on the current metrics, TSM appears favorable for long-term investors, given its positive net margin, ROIC exceeding WACC, and a sustained bullish long-term trend. However, the recent bearish volume trend suggests caution, indicating that it may be wise to monitor for a return of buyer volumes before making a purchase.
Specific risks related to TSM include intense competition within the semiconductor sector, vulnerability to supply chain issues, and high market valuation relative to historical metrics.
Disclaimer: This article is not financial advice. Each investor is responsible for their own investment decisions.
Additional Resources
- Nvwm LLC Takes Position in Taiwan Semiconductor Manufacturing Company Ltd. $TSM – MarketBeat
- TSM Stock Trades Near 52-Week High: Time to Hold or Book Profits? – TradingView
- Taiwan Semiconductor’s Chip Price Hike May Hit Apple Fans Hard – Benzinga
- Taiwan Semiconductor begins informing Apple, others, of price hikes: report (TSM:NYSE) – Seeking Alpha
- Taiwan Semiconductor Manufacturing Company Limited (TSM) Announces Q3 2025 Results – Yahoo Finance