1 Riding High on Explosive Growth that Closer to the Trillion-Dollar Milestone

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 Introduction

In the fast-paced world of tech and finance, one company has been making waves like never before. Taiwan Semiconductor Manufacturing Company (TSMC) has ignited investor enthusiasm with its meteoric rise in 2024. But there's a tantalizing question on everyone's mind: Can TSMC break through the elusive trillion-dollar barrier? Buckle up as we explore the thrilling journey of this semiconductor giant and uncover the secrets behind its remarkable ascent. 🚀🔥.

TSMC's business model

TSMC operates on a pure-play foundry model, which focuses exclusively on manufacturing semiconductor products for its clients. Here are some key points about TSMC's business model:

1. Foundry Specialization:

   TSMC was established in 1987 and is headquartered in Hsinchu Science Park, Taiwan. It pioneered the pure-play foundry business model by choosing not to design, manufacture, or market any semiconductor products under its name. Instead, TSMC dedicates itself to manufacturing customers' products, ensuring that it never competes with its clients.

2.  Economies of Scale:

   As the world's first dedicated semiconductor foundry, TSMC benefits from economies of scale. By focusing solely on manufacturing, it can efficiently scale its operations. This efficiency is reflected in TSMC's superior operating margins compared to Integrated Device Manufacturers (IDMs) that both design and manufacture chips

3. Operating Margins:

   While TSMC's operating margins have been strong, they have plateaued in recent years. This suggests that the company may be nearing the point of maximum economies of scale. However, its position as a foundry shields it from intense competitive pressure faced by fabless semiconductor companies.

4. Fabless vs Foundry:

   Fabless semiconductor companies, such as Nvidia, Qualcomm, and AMD, specialize in chip design but outsource manufacturing to foundries like TSMC. These fabless companies must continuously innovate to stay ahead, releasing new products to outpace competitors. As a result, foundries like TSMC experience higher demand for chip manufacturing, positioning them as winners in the industry.

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