TSMC TSM
What does TSMC do?
TSMC is the world's largest independent semiconductor foundry. The company does not develop or design its own chips for the end market, but manufactures integrated circuits to its customers' specifications. Its offering ranges from logic chips to mixed-signal and radio-frequency components and embedded memory. It is complemented by mask making, testing and advanced packaging technologies, as well as engineering services.
TSMC earns revenue from fabless chip design companies, integrated device manufacturers and system providers. The chips are used in smartphones, high-performance computing, AI accelerators, automotive electronics and consumer electronics, among other applications. Competitively, TSMC is regarded as technologically leading in the most advanced manufacturing processes. Its position rests on high investment in research and fabs, close customer relationships and an extensive ecosystem of design and packaging partners. Competitors include Samsung Foundry, Intel Foundry and Chinese providers such as SMIC.
Score profile
Rank vs. Semiconductors (40 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, TSMC ranks among the best in the group Semiconductors (8.9/10). On growth, the company ranks above average in the group Semiconductors (7.3/10). On valuation (higher = cheaper), the stock ranks above average in the group Semiconductors (7.9/10). On financial strength, TSMC ranks in the middle in the group Semiconductors (5.6/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 17.0x | 18.7x | better than 59 % |
| Trailing P/E | 25.7x | 42.4x | better than 74 % |
| PEG ratio | 0.7x | 0.8x | better than 58 % |
| EV/EBITDA | 3.6x | 21.3x | better than 98 % |
| Price/sales | 0.4x | 5.8x | better than 99 % |
| Revenue growth | 50.9% | 25.5% | better than 79 % |
| Earnings growth | 68.7% | 7.4% | better than 67 % |
| Gross margin | 65.9% | 53.3% | better than 81 % |
| Operating margin | 58.7% | 15.5% | better than 94 % |
| Net margin | 51.1% | 10.3% | better than 94 % |
| Return on equity | 41.9% | 8.6% | better than 89 % |
| Debt/equity | 11.6% | 36.5% | better than 74 % |
| Current ratio | 2.5x | 3.3x | better than 38 % |
| Dividend yield | 1.0% | 1.2% | – |
| Payout ratio | 24.5% | 38.0% | – |
| Beta | 1.23 | 1.92 | – |
Valuation: what is TSMC worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give TSMC a model range of 437.70 USD to 437.70 USD per share.
20 analysts, average rating “Strong buy”, average price target 586.69 USD (+48.0%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Demand for chips for AI, data centers and smartphones largely determines utilization of manufacturing capacity.
- The technological lead in cutting-edge manufacturing processes allows higher prices and ties large customers over the long term.
- High capacity utilization and economies of scale in capital-intensive fabs directly affect profitability.
Risks
- The concentration of production in Taiwan carries geopolitical risks, in particular regarding relations between China and Taiwan.
- Revenue depends heavily on a few large customers whose orders can fluctuate cyclically.
- Export controls, trade disputes and the enormous investment needs for new fabs weigh on planning certainty and return on capital.
What to look for with TSMC
Gross margin is particularly informative, as it simultaneously reflects pricing power, process leadership and fab utilization in the capital-intensive foundry business.