A recent report by The Economist praises Taiwan Semiconductor Manufacturing Company (TSMC) for its "incredible" advantages, discipline, and resilience, while also emphasizing the necessity for the company to expand its operations beyond Taiwan. This strategic global expansion is seen as crucial for TSMC's continued growth and to mitigate risks associated with its heavy concentration in Taiwan.

Data indicates that Taiwan's semiconductor industry is projected to grow by 16.5% in 2025, reaching NT$6.17 trillion (US$192.28 billion), outpacing the global industry's expected 12.5% growth. TSMC, a key player, has seen its revenue grow by over 100% since early 2020, with a significant portion of its market share in advanced chips concentrated in Taiwan. The foundry sector in Taiwan is expected to be a major beneficiary of the AI boom, with a projected 20.1% annual expansion in production value for 2025.

The increasing demand for Artificial Intelligence (AI) and High-Performance Computing (HPC) is the primary driver for the semiconductor industry. TSMC is at the forefront of supplying critical components for AI data centers, holding a dominant market share in AI logic semiconductors. By 2030, AI applications are expected to account for 45% of semiconductor sales. However, replicating TSMC's precision in the United States presents challenges, and protecting its core business from geopolitical risks may prove even more difficult. This external expansion, including investments in Japan and Germany, but with a significant concentration in Arizona, USA, adds a new layer of complexity to the company's strategy.

Market Signals

Sector impacts and investment opportunities in AI infrastructure.
Shifts in competitor positioning and challenges for companies like Intel and Samsung.
Focus on advanced nodes, with 5nm and smaller chips constituting a substantial portion of TSMC's revenue.

TSMC benefits from the surging demand for AI and its global expansion. Key clients like Nvidia, AMD, Apple, and Google benefit from access to cutting-edge chip technology. Governments (US, Japan, Europe) benefit from increased domestic chip production, job creation, and enhanced supply chain security. However, challenges related to skilled labor shortages in new manufacturing locations pose a concern for the supply chain.

Action Timeline

Immediate: Capitalize on the growing AI demand by investing in semiconductor infrastructure.
Short-term: Pursue strategic partnerships to secure advanced semiconductor supply chains and monitor US tariff policies and subsidies.
Long-term: Observe TSMC's 1.4nm process mass production by 2028 as an indicator of technological leadership and evaluate the effectiveness of initiatives like the US CHIPS Act.