TSMC

• 1. Introduction

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  Taiwan Semiconductor Manufacturing Company, better known as TSMC, builds about 70 percent of the chips that the world's designers pay a contract manufacturer to make. From its base in Hsinchu Science Park, it has become one of the largest non-American companies on earth by market value. The artificial intelligence boom has pushed it even higher, because the advanced chips that field needs depend on its factories. That position carries a warning. Analysts describe the company as a supply chain bottleneck, and they fear that a single disruption could set off another worldwide chip shortage. How did a business that two American chip giants declined to back become so hard to replace? Who actually owns it? And why is a company so bound to one island now building factories in other countries?

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• 2. A Blank Cheque

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  In 1986, Li Kwoh-ting, speaking for Taiwan's Executive Yuan, invited Morris Chang to run the Industrial Technology Research Institute, known as ITRI. The invitation came with a blank cheque to build the island's chip industry. Money was not the real obstacle. The work was expensive and risky, and investors were hard to find.

  Chang went looking for partners among the American giants. Texas Instruments and Intel both turned him down. Only Philips agreed to a joint venture. It put up $58 million, transferred its production technology and licensed its intellectual property. In return it received a stake of a little over a quarter of the new company.

  The Taiwanese government supplied the largest share of the rest. The National Development Fund of the Executive Yuan provided another 48.3 percent of the startup capital, and generous tax benefits came with it. Eight private companies contributed 20 percent. Formosa Plastics Group and CAPCO held 5 percent each, while Taiyuan Textile held 1 percent. Their owners were among the island's wealthiest families, with firms in plastics, textiles and chemicals. Accounts describe these families as directly "asked" by the government to invest. The last 4.1 percent came from Kuomintang Central Investment Co., the investment arm of Taiwan's ruling party at the time.

  From the start, TSMC worked more like a project of the Taiwanese state than a fully private firm. Founded in 1987, it set out to commercialise semiconductor research developed at ITRI. It became the world's first dedicated semiconductor foundry.

  Philips contributed more than capital. It handed over manufacturing technology, intellectual property and patents, and it supplied the first chief executive, James E. Dykes, who had worked at Philips North America. Dykes left after a year, and Chang took over the job. Philips was itself moving toward relying on outside foundries, and over the following decades it steadily sold its TSMC shares and turned its attention to healthcare technology.

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• 3. Owners and Heirs

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  By 1993, TSMC shares traded on the Taiwan Stock Exchange. In 1997, it became the first Taiwanese company to list on the New York Stock Exchange. Since 1994, its revenue has grown at a compound annual rate of 17.4 percent, and its earnings at 16.1 percent.

  The ownership table today holds a surprise. The Taiwanese government, through the National Development Fund, is the largest individual shareholder, with 6.38 percent in early 2024. Yet most of the company belongs to foreign investors. About 56 percent of shares sit with the general public and about 38 percent with institutions. BlackRock held 5.09 percent, Capital Research and Management Company held 3.61 percent, and the Government of Singapore Investment Corporation held 3.32 percent.

  The leadership story is just as layered. Chang retired in 2018 after 31 years of TSMC leadership. He had served as chairman from 1987 until then, and as chief executive from 1987 to 2005. Rick Tsai held the chief executive post from 2005 to 2009. Chang then returned for a second term that lasted until 2013.

  From 2013 to 2018, C. C. Wei and Mark Liu shared the role as co-chief executives. When Chang stepped down, Liu became chairman and Wei became Chief Executive. In June 2024, Wei took the chairman's seat as well, and Liu's tenure as chairman ended.

  In 2025, Forbes ranked the company 38th on its Global 2000 list. That ranking raises a question about the place TSMC occupies at home.

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• 4. An Island's Weight

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  In 2022, Taiwan's exports of integrated circuits came to $184 billion, nearly 25 percent of the island's GDP. TSMC makes up about 30 percent of the main index of the Taiwan Stock Exchange. Few companies anywhere carry that much of a national economy.

  The weight shows up in a public emergency too. In June 2021, only about 10 percent of Taiwan's 23.5 million people were vaccinated against COVID-19, after nearly a year of public controversy over the shortage. The government agreed to let TSMC and Foxconn negotiate vaccine purchases on its behalf. In July 2021, Fosun Pharma, BioNTech's Chinese sales agent, announced a deal for 10 million BioNTech doses from Germany. TSMC and Foxconn each pledged to buy five million doses, for up to $175 million, to donate to Taiwan's vaccination programme.

  It also weighs on the grid. TSMC accounts for roughly 5 percent of the energy consumed in Taiwan, which exceeds the use of the capital city Taipei. In 2020, it became the first semiconductor company in the world to join the RE100 initiative. The pledge was to use 100 percent renewable energy by 2050, and it was expected to speed Taiwan's shift to renewables. The company has also pledged net-zero emissions by 2050.

  Water is the other heavy demand. In 2024, TSMC reportedly used over 150,000 tons of water per day in Hsinchu City, roughly 10 percent of the city's supply. The company has invested in water conservation, including wastewater recycling systems that can reclaim over 85 percent of the water used in fabrication.

  In July 2020, TSMC signed a 20-year deal with Ørsted to buy the entire output of two offshore wind farms under development off Taiwan's west coast. At the time it was the largest corporate green energy order ever placed anywhere in the world. The company also sits in the FTSE4Good Index, where it is the only Asian company in the top ten.

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• 5. Chips for Everyone

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  AMD, Apple, ARM, Broadcom, Marvell, MediaTek, Qualcomm and Nvidia share one thing: they design chips but rely on TSMC to build them. Newer names such as Allwinner Technology, HiSilicon, Spectra7 and UNISOC do the same. Xilinx uses TSMC's foundry for its programmable logic devices, and Altera did before it.

  Even companies with their own factories send work to TSMC. Intel, NXP, STMicroelectronics and Texas Instruments outsource part of their production. Intel and Texas Instruments are the same two companies that once refused Chang.

  Apple became the customer that shaped the company's fortunes. In 2011, TSMC was reported to have begun trial production of the A5 and A6 chips for Apple's iPad and iPhone. By May 2014, reports said Apple sourced its A8 and A8X chips from TSMC. For the iPhone 6S launch, Apple split the A9 between TSMC and Samsung to boost volume, but the A9X came exclusively from TSMC. As of 2014, Apple was TSMC's most important customer. That October, ARM and TSMC announced a multi-year agreement to develop ARM-based processors on a 10-nanometre FinFET process.

  The technical record behind these deals is unusual. TSMC produces for customers on process nodes ranging from 2 microns down to 3 nanometres, and its global capacity in 2020 was about thirteen million wafers a year, counted in 300 mm equivalents. It was the first foundry to market 7-nanometre and 5-nanometre production. The 5-nanometre process was used for the 2020 Apple A14 and M1 chips, the MediaTek Dimensity 8100 and AMD's Ryzen 7000 processors. It was also the first to bring ASML's extreme ultraviolet lithography to high-volume commercial use.

  Its N7+ process was the first commercially available extreme-ultraviolet process in the industry. It offered 15-20 percent higher transistor density and 10 percent lower power use than what came before. The plain N7 reached volume faster than the 10-nanometre and 16-nanometre generations. The N5 generation doubled transistor density and added another 15 percent in performance.

  In late 2022, volume production began on the 3-nanometre process, called N3. It offered up to a 70 percent gain in logic density and a 15 percent speed gain over 5 nanometres. By late 2025, the company had moved to its 2-nanometre technology, N2. That step swapped FinFET transistors for Gate-All-Around nanosheet transistors, a major change in architecture. Against the enhanced 3-nanometre process, N2 offers a 10 to 15 percent performance boost, or a 25 to 30 percent cut in power use. Chip density rises by more than 15 percent.

  In June 2020, TSMC was the manufacturer chosen for Apple's 5-nanometre ARM processors, as Apple planned to move its entire Mac lineup to Arm-based chips. By July 2021, both Apple and Intel were reported to be testing their own chip designs on TSMC's 3-nanometre production.

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• 6. Boom and Bust

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  A foundry lives by a cycle that never quite stops. During upturns, TSMC must secure enough capacity to meet strong customer demand. During downturns, weak demand leaves idle capacity, and the high fixed costs of its manufacturing plants keep running. Results therefore swing over a period of a few years, and the swings show more in earnings than in revenue. The business also tends to peak in the third quarter and dip in the first.

  The year 2014 showed the upswing at its sharpest. Smartphone makers such as Qualcomm, MediaTek and Apple placed ever larger orders. Competitors struggled. GlobalFoundries and United Microelectronics Corporation had trouble ramping 28-nanometre capacity, and Samsung and Intel could not match the needs of advanced mobile chips for outside customers.

  TSMC raised its guidance in March 2014 and posted what it called unseasonably strong first-quarter results. Second-quarter revenue came in at NT$183 billion, with 28-nanometre business growing more than 30 percent from the previous quarter. By August, its fourth-quarter capacity was almost fully booked, which had not happened for many years. The ripple effect was blamed on TSMC winning CPU orders from Apple. Sales peaked in October, then fell 10 percent in November as some customers trimmed inventory. Revenue for 2014 still grew 28 percent, and the company forecast 15 to 20 percent growth for 2015.

  The market valued the company accordingly. In March 2017, its capitalisation of NT$5.14 trillion, or US$168.4 billion, passed Intel's US$165.7 billion for the first time. On the 27th of June 2020, TSMC briefly became the world's tenth most valuable company, at US$410 billion.

  The global semiconductor shortage of 2020-2023 pushed prices up. United Microelectronics raised prices by roughly 7-9 percent, while TSMC lifted prices on its more mature processors by about 20 percent. For 2020, TSMC earned a net income of US$17.60 billion on consolidated revenue of US$45.51 billion. Those figures were up 57.5 percent and 31.4 percent from 2019.

  In July 2022, the company reported a record second-quarter profit, with net income up 76.4 percent from a year earlier. Berkshire Hathaway disclosed a purchase of 60 million TSMC shares in the third quarter of 2022, a stake worth $4.1 billion. By the next quarter, Berkshire had sold 86.2 percent of it, citing geopolitical tensions.

  In February 2024, the shares hit a record, reaching NT$709 in the trading day and closing at NT$697, up 8 percent. A higher price target on Nvidia helped drive the jump. Revenue rose from NT$0.76 trillion in 2014 to NT$3.8 trillion in 2025, while the workforce grew from 43,500 to 83,800 by 2024. In January 2026, the company reported a 35 percent increase in fourth-quarter profit, another record, as demand for AI chips stayed strong.

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• 7. Factories Abroad

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  In 2024, TSMC's sales by region put the United States first at 68.8 percent, ahead of China at 11.5 percent. Taiwan, where most of the production happens, accounted for just 9.3 percent. The geography of its customers helps explain a push to spread its factories.

  Since the start of the 2020s, TSMC has expanded its operations to reduce the business risk of a war between Taiwan and the People's Republic of China. It opened new fabs in Japan and the United States and has plans for Germany. Not every move abroad was new or cautious. In March 2017, over the objection of the Tsai Ing-wen administration, TSMC invested US$3 billion in a manufacturing subsidiary in Nanjing.

  The oldest American site is in Camas, Washington, 32 km outside Portland, Oregon. It began in June 1996 as WaferTech, a joint venture of TSMC, Altera, Analog Devices and ISSI. Together with minor individual investors, they put US$1.2 billion into it, then the largest startup investment in the state's history. Production started in July 1998, and its first product was a 0.35 micrometre part for Altera. TSMC bought out the partners in 2000. As of 2024, the plant employs 1,100 people.

  In November 2021, TSMC and Sony announced a new Japanese subsidiary, Japan Advanced Semiconductor Manufacturing, known as JASM, in Kumamoto. The initial investment was about $7 billion, with Sony putting in about $500 million for a stake under 20 percent. In February 2022, Denso joined with a stake above 10 percent, amid a shortage of chips for automobiles. Construction began in 2022, and the first factory, Fab 23 in Kikuyo, began commercial operations in December 2024. It cost US$8.6 billion, and Japan's Ministry of Economy, Trade and Industry subsidised 476 billion yen of it. A second factory next door was under construction as of January 2025, at an estimated US$13.9 billion with 732 billion yen from the ministry.

  In August 2023, TSMC committed €3.5 billion to a €10+ billion factory in Dresden, Germany, backed by €5 billion from the German government. Robert Bosch, Infineon Technologies and NXP Semiconductors each took a 10 percent share, forming the European Semiconductor Manufacturing Company. The plant is planned to be fully operational in 2029, with monthly capacity of 40,000 12-inch wafers.

  The American project in Phoenix, Arizona, proved far harder. In November 2020, city officials approved a $12 billion plant, after the Trump administration warned about the world's electronics being made outside the United States. TSMC said the plant would create 1,900 full-time jobs. In December 2022, it announced plans to triple the investment, and it also reported major cost problems. Construction in the US ran four to five times what an identical plant would cost in Taiwan, and qualified staff were hard to find. American-made chips would cost at least 50 percent more than Taiwanese ones.

  In July 2023, the company warned that US talent was insufficient and that Taiwanese workers would be brought in for a limited time. In September 2023, an analyst said the chips would still have to be sent back to Taiwan for packaging. In January 2024, chairman Liu said the second Arizona plant would likely not reach volume production of advanced chips until 2027 or 2028.

  In April 2024, the Biden administration announced a preliminary award of up to $6.6 billion under the CHIPS and Science Act, plus up to $5 billion in proposed loans. It would support more than $65 billion across three Phoenix plants, the largest foreign direct investment in a greenfield project in US history. In November 2024, the Commerce Department finalised the $6.6 billion award. TSMC agreed to use its most advanced "A16" technology there and to skip stock buybacks for five years under an "upside sharing agreement". In July 2025, Wei said production would speed toward a "gigafab" cluster of six facilities, after an additional $100 billion investment.

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• 8. Patents and Secrets

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  On the 26th of August 2019, GlobalFoundries filed several patent infringement lawsuits against TSMC in the United States and Germany. It claimed that TSMC's 7, 10, 12, 16 and 28-nanometre nodes infringed 16 of its patents, and it named twenty defendants. TSMC said it was confident the allegations were baseless. On the 1st of October 2019, TSMC countersued in the United States, Germany and Singapore, claiming that GlobalFoundries' 12, 14, 22, 28 and 40-nanometre nodes infringed 25 of its patents. The fight ended quickly. On the 29th of October 2019, the two announced a cross-licence covering all their existing patents for the life of those patents, and new patents for the next 10 years.

  Politics soon replaced patents. In July 2020, TSMC confirmed it would stop shipping silicon wafers to Huawei and its subsidiary HiSilicon by the 14th of September. In October 2024, TSMC told the United States Department of Commerce about a potential breach of export controls. One of its most advanced chips had reached Huawei through another company with ties to the Chinese government.

  In June 2025, TSMC announced the TSMC-UTokyo Lab, its first joint research laboratory with an overseas university. Two months later, in August 2025, the company reported that two current employees and six former employees had illegally acquired trade secrets related to its leading 2-nanometre process. One of them went on to work for Tokyo Electron, a partner of Rapidus, Japan's own semiconductor effort, but has since been terminated. Taiwanese authorities have arrested a number of suspects. Where the case leads will test how closely the company can guard its newest process.

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