Korean Media: AI "Chip" Giant TSMC Surpasses Samsung Electronics in Performance

Fourth Quarter Net Profit 16.3 Billion USD ... Tech Giants Are Queueing Up to Buy "More Chips"

The world's largest wafer foundry (semiconductor contract manufacturing) company, Taiwan's TSMC, achieved record sales and profits in the fourth quarter of last year (October-December), marking the third consecutive quarter of records since the second quarter of last year. As a result, both the annual sales and profits for 2025 reached new historical highs. Under the backdrop of explosive growth in demand for AI semiconductors, TSMC has monopolized orders from major high-performance AI chip design companies such as NVIDIA and AMD, which led to this achievement.

TSMC announced on the 15th that sales in the fourth quarter of last year were 33.73 billion USD (approximately 49 trillion KRW), an increase of 21% compared to the same period last year, with net profit increasing by 35% to reach 16.3 billion USD. Operating profit was 18.215 billion USD, exceeding Samsung Electronics' operating profit in the fourth quarter of last year (13.8 billion USD) and the previous record of 16.1 billion USD set in the third quarter of 2018. TSMC expects sales to grow by another 30% this year. Industry insiders said, "As the sales of the most advanced processes begin to be formally reflected, high growth is expected to continue."

Technology giants queuing up to buy "more chips" ... TSMC's revenue is 54% profit

As a pure foundry (single) business model company, TSMC's revenue is about half of Samsung Electronics, which covers semiconductor, smartphone, and home appliance businesses (last quarter's revenue was 93 trillion KRW, approximately 439 billion RMB). However, TSMC's operating profit exceeded that of Samsung Electronics due to its high-profit structure, where operating profit accounts for 54% of revenue. The operating profit margin (operating profit as a percentage of revenue) of ordinary large-scale manufacturers and IT hardware companies is typically only 5%-15%, while more efficient software companies also only reach 20%-30%. Therefore, TSMC's profitability is overwhelming. TSMC's ability to achieve such high profits is because its revenue mainly comes from high-value-added advanced processes, and due to the recent surge in demand for artificial intelligence (AI), it has created a "supplier advantage" market where customers are queueing up to buy. In particular, the Taiwanese government has provided various tax incentives and support for R&D expenses, which is also one of the reasons for TSMC's particularly high profitability.

TSMC stated that in the fourth quarter of last year, the sales of the latest 3-nanometer process accounted for 28% of total sales, an increase of 3 percentage points from the previous quarter, setting a new record. In chip manufacturing processes, the smaller the number, the more advanced the technology. The 3-nanometer process is the "most advanced process" used to produce the latest AI semiconductors and flagship mobile chips. It has a dominant market share with almost no competitors, so its profitability is naturally relatively high. This means that high-value-added advanced products such as AI semiconductors have simultaneously driven TSMC's sales growth and improved its profitability.

TSMC Riding the AI Wind

In fact, the proportion of AI semiconductors in TSMC's sales is increasingly growing. The securities industry believes that the proportion of Apple, TSMC's traditional largest customer, in sales dropped from 22%-25% in 2024 to around 20% last year. On the contrary, the proportion of NVIDIA, which was around 10% in 2024, is gradually increasing. It is predicted that this proportion will rise to a level similar to that of Apple within this year.

On TSMC's advanced packaging (CoWoS: bonding multiple semiconductor chips onto a single board) production line, NVIDIA has already occupied more than half of the total production capacity. Analysts say that AI GPUs will be in a "sold-out" state for the next two years. IT specialist media The Information stated, "The demand for the most advanced chips is three times the production capacity of TSMC. Orders from companies like NVIDIA, Google, and Broadcom have surged, to the point where TSMC can't handle them all."

TSMC's market dominance in the next-generation 2-nanometer process is also strengthening. Starting from the fourth quarter of last year, the 2-nanometer process has been mass-produced, and the sales in this area are expected to be formally reflected in the performance starting this year. TSMC's 2-nanometer process yield rate is between 70%-90%, which is more stable than that of Samsung Electronics. The dedicated production lines for 2-nanometer processes are based on long-term contracts with core customers such as Apple and NVIDIA, and have pre-sold production volumes for several years. On that day, TSMC expected sales for the first quarter of this year to reach 34.6-35.8 billion USD, continuing the ninth consecutive quarter of growth after the fourth quarter of last year.

Building Five Factories in the United States ... Concerns About Earnings Deterioration Exist

TSMC plans to concentrate hundreds of billions of dollars in equipment investments on expanding 2-nanometer and advanced packaging to consolidate its "dominant" position in the global foundry market, which holds 70% of the market. However, some people are worried that with the expansion of production facilities in the United States, its profitability may decline. In the negotiations over U.S. tariffs, Taiwan used the construction of five new semiconductor factories in Arizona, the United States, as a condition to reduce the reciprocal tariff from the original 20% to 15%. The production cost of semiconductors at TSMC's U.S. factories is about 2.4 times higher than that in Taiwan, and labor and raw material costs are also about twice as high. If TSMC's five semiconductor factories in the United States officially go into operation, the current overall profit margin (around 60%) is expected to drop to around 53% in the long term.

Source: Chosun Ilbo

Original: toutiao.com/article/1854442003340553/

Statement: This article represents the views of the author.