TSMC's Technological Edge and Strategic Resilience Fuel Its Ascent in the Semiconductor Race
1min read As of last week, TSMC (TSM) experienced a 3.49% rise, marking a two-day consecutive increase with a 5.63% gain over the past two days. For the week, TSMC increased by 3.46%, adding up to a total of 5.63% for the year to date, making its latest market valuation reach $1,820.03 billion.
A recent analyst report highlighted the potential growth prospects for TSMC, emphasizing that NVIDIA might become one of TSMC’s top clients by 2025, potentially contributing 20% of its revenue. Besides NVIDIA, the report mentioned the promising future of custom AI chips (ASICs) within the next two to three years, which could bolster TSMC's business. As most AI chips are expected to transition to 3-nanometer technology starting from 2025, this technical upgrade may lead to a rise in average selling prices, supporting TSMC's earnings growth through 2026.
However, TSMC faces challenges as companies like Apple and MediaTek hold back on adopting its 2-nanometer technology due to high costs. While NVIDIA and Qualcomm might opt for Samsung's 2-nanometer process, TSMC maintains its competitive edge with superior yields in its existing 3-nanometer process—outperforming Samsung. The 3-nanometer yield for TSMC surges over 80%, significantly higher than Samsung's 20% yield.
TSMC has demonstrated technological superiority, with its 5-nanometer and 3-nanometer processes boasting greater transistor density than Samsung's comparable processes. This dominance is evident as U.S. semiconductor firms remain loyal to TSMC, reducing their reliance on Samsung's less efficient processes. As a result, TSMC holds a remarkable share of above 60% in the semiconductor market, exerting pressure on Samsung.
Although the semiconductor race intensifies with both TSMC and Samsung aiming to mass-produce 2-nanometer processes by the latter half of this year, it remains uncertain if Samsung will match TSMC's yield rates. This situation potentially influences NVIDIA's and Qualcomm's decisions as they contemplate the emerging offerings from both foundries.
Despite TSMC's impressive profitability, the upward pressure on prices highlights a warning sign for the industry—excessive cost increases could alienate clients. Consequently, TSMC invests in advanced packaging technologies to enhance its service offerings, intending to sustain and expand its client base amid escalating competition.
Simultaneously, MediaTek’s recent choice of TSMC’s N3P process for its Dimensity 9500 chip signifies the strategic importance of TSMC’s 3-nanometer refinements. The move underscores TSMC's ability to adapt and provide effective solutions as clients show reluctance towards the costly 2-nanometer upgrade.
As the semiconductor landscape evolves, TSMC's strategy hinges on captivating clients with its robust technology portfolios while managing rising costs. The company's resilience will likely play a fundamental role in shaping future advancements in AI and mobile technologies, proving crucial in the ongoing technological arms race.
