The World Runs on TSMC, But Can Taiwan Run on One Company?

When people think of trillion-dollar companies, names like Apple, Microsoft, or the $4 trillion giant NVIDIA usually come to mind. But halfway around the world, Taiwan has been building a tech giant of its own. 

More than just a local success story, Taiwan Semiconductor Manufacturing Company (TSMC) is the backbone of the global semiconductor industry. Its foundries make the chips that power nearly every major tech device, from smartphones and laptops to data centres and autonomous cars. 

In July, TSMC joined the trillion-dollar club, placing it among the top 3 Asian companies to achieve this since PetroChina briefly reached it in 2007. However, this wasn’t the giant’s first brush with the trillion-dollar mark. Last year, it hit the milestone briefly before slipping amid market fluctuations. 

As of October 22, the giant’s market capitalisation lies at TWD 38.12 trillion, which is approximately $1.24 trillion. 

The AI boom lies at the heart of TSMC’s success, with NVIDIA as its biggest customer, alongside Apple, AMD and Broadcom. There have also been reports that OpenAI CEO, Sam Altman, is close to securing a deal with a TSMC foundry instead of going ahead with Intel Foundry. Reports indicate that Altman has also held quiet meetings with Taiwan’s Foxconn as well as Korea’s Samsung and SK Hynix. 

TSMC’s latest quarterly earnings further reinforce its earnings. In Q3 2025 (ended September), TSMC reported a net profit of NT$452.3 billion (~$14.1 billion) and revenue of $33.1 billion, driven by strong 3nm and 5nm chip shipments.

CEO CC Wei said both front-end and back-end capacity remain “very tight” as TSMC works to increase supply for AI clients. He added that the company is “working very hard to narrow the gap between demand and supply”, with new CoWoS and advanced packaging capacity planned for 2026.

TSMC also confirmed that production of its 2nm (N2) chip will begin this quarter, with the N2P node and A16 process scheduled for 2026.

Given that NVIDIA’s AI accelerators rely heavily on TSMC’s advanced nodes, securing an OpenAI deal would further secure TSMC’s leadership in the generative AI hardware market.

Where’s the Rest of Taiwan?

With TSMC now at the trillion-dollar mark, its contrast with Taiwan’s next-tier chipmakers is stark. The second-largest company by market value, Hon Hai Precision Industry, more commonly known as Foxconn, is valued at around TWD 3.37 trillion (~$110 billion).

Other big Taiwanese names like Delta Electronics, MediaTek, Fubon Financial Holding and Quanta Computer make up the rest of the country’s top in terms of market cap. Yet, their valuations pale in comparison to TSMC’s scale.

TSMC’s dominance stems from its specialisation in leading-edge nodes, including 3nm and the upcoming 2nm and 1.4nm technologies.

Foxconn, in comparison, operates mainly as a contract manufacturer for consumer electronics. While it remains one of Apple’s primary assemblers and has a vast global manufacturing footprint, it does not hold proprietary technologies that can scale its value at the same pace. Its strength lies in assembly and servers, not in the semiconductor brainpower that drives companies like TSMC. 

Daniel Nystedt, research analyst at TriOrient Investments, told AIM that TSMC is benefiting from deeper capital markets and premiums associated with American Depositary Receipts (ADR). He added that, unlike Foxconn, which regularly spins off new ventures into separate entities, TSMC has consolidated its growth, retaining more value under one roof. 

Some of these ventures include Foxconn Industrial Internet (Fii), focusing on manufacturing communication network equipment and Foxtron, a joint venture between Foxconn and Taiwanese automaker Yulon Group for electric vehicles.

Does China Play a Part?

The current excitement surrounding AI has been a massive boost for TSMC, but this success comes with a big risk: market uncertainty. 

The demand for AI chips is incredibly volatile. A sudden market dip, oversupply, or a shift in AI algorithms can cause TSMC’s enormous valuation to drop very quickly.

Compounding this market fragility is the threat of geopolitical tension. China recently expanded export controls on rare-earth materials, critical inputs for semiconductors and magnets. This move is seen as politically motivated, considering the new rules require case-by-case approvals for these rare-earth-related exports. 

Some reports even suggest these controls could, in extreme scenarios, bar TSMC from selling chips to US entities reliant on Chinese rare earths. Taiwan’s government has downplayed the impact, saying the restricted materials differ from those used in chip production. 

Despite these headwinds, TSMC remains confident about long-term demand. “If the Chinese market is not available, AI support will still grow dramatically,” Wei said.

TSMC continues to lead in advanced process generations, from 5nm and 3nm to its upcoming 2nm and 1.4nm nodes, each boosting performance and efficiency for AI accelerators.

TSMC’s clients, including Qualcomm, Broadcom and NVIDIA, rely on its advanced foundry services, securing its dominance in the global fabless semiconductor ecosystem. Qualcomm benefits from its Snapdragon processors and modems, while Broadcom maintains a near-monopoly in Ethernet switch chips. 

That said, as TSMC raises wafer prices, NVIDIA has explored alternatives like Samsung, signalling friction in the value capture between designer and manufacturer.

To mitigate geopolitical risk, TSMC is diversifying its manufacturing base. The company confirmed during its latest earnings call that cost dilution from its overseas fabs, in Arizona, Japan and Germany, is expected to be around 1-2% in 2025, an improvement on previous estimates and a sign of tighter cost control even amid rapid global expansion. 

Government Support

Taiwan’s government continues to play a hands-on role in keeping advanced node production on home soil, even as TSMC goes global with fabs in Japan, the US and Germany.

“With support from the Taiwan government, we are preparing for multiple phases of two-nanometre fabs in both Hsinchu and Kaohsiung science parks,” Wei said.

As Nystedt noted, TSMC’s model has helped transform the island into the world’s second-largest base for chip designers, spawning companies like MediaTek, Realtek, Alchip, Global Unichip Corporation, along with dozens of IP firms such as eMemory and M31. Even equipment suppliers have moved up the value chain, building advanced packaging machines tailored specifically for TSMC’s cutting-edge CoWoS technology.

While some argue that state support is overly TSMC-centric, Nystedt said most funding is channelled through associations such as the Taiwan Semiconductor Industry Association (TSIA) and Taiwan Electrical and Electronic Manufacturers’ Association (TEEMA), ensuring it reflects sector-wide needs rather than single-company lobbying.

The trillion-dollar milestone, once thought unattainable for non-American firms, has now been surpassed by TSMC twice. Nystedt pointed out that investor appetite is uneven. While semiconductor ventures can attract funding thanks to Taiwan’s deep industry know-how, startups in less familiar sectors may struggle to secure backing.

“I see tremendous potential for India to play a leading role in AI, specifically due to US-China tensions. For Taiwan, the government focuses on building a strong ecosystem so entrepreneurs can do their thing,” he indicated.

The post The World Runs on TSMC, But Can Taiwan Run on One Company? appeared first on Analytics India Magazine.

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