1 Surprising Way Taiwan Semiconductor Manufacturing (TSMC) Makes Money

• Surging request for AI and the ongoing information halfway build-out person fueled robust maturation for Taiwan Semiconductor Manufacturing (TSMC).

• While high-end processors correspond the bulk of its sales, a bequest concern has begun to reaccelerate.

• Despite aggregate maturation drivers and a beardown way grounds of growth, TSMC sells for a discount to the broader market.

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Developments successful artificial quality (AI) implicit the past fewer years person caused a paradigm displacement successful the technological landscape. For example, 9 of the apical 10 companies measured by marketplace headdress person wide ties to this once-in-a-generation technology.

One caller summation to the apical 10 database is Taiwan Semiconductor Manufacturing (NYSE: TSM), besides known arsenic TSMC. The institution boasts the world's astir precocious spot foundry and, arsenic such, produces astir 90% of the world's astir precocious semiconductors, including those for high-end computing and AI.

This has fueled a resurgence successful involvement successful the once-stodgy chipmaker, arsenic caller shareholders person flocked to the stock. In fact, the unprecedented request for high-end processors and TSMC's market-leading exertion person helped the institution adhd much than $1 trillion successful marketplace headdress since the dawn of AI successful aboriginal 2023.

New probe from The Motley Fool provides granular item into however TSMC makes money. Not surprisingly, the lion's stock of the company's gross comes from the merchantability of chips utilized for high-performance computing (HPC). This includes high-end processors utilized successful information centers and unreality computing to facilitate the grooming and moving of AI models. The conception accounted for 57% of TSMC's third-quarter sales.

Yet HPC lone became the company's ascendant conception successful aboriginal 2022. Investors mightiness beryllium amazed to larn that, until then, TSMC's biggest moneymaker was the smartphone segment. In caller years, income of smartphones person lagged, arsenic a cleanable tempest of economical conditions encouraged users to bent connected to their existing phones a spot longer. Surging ostentation began successful 2021 and roseate to grounds levels, slowing user spending and punishing the smartphone market, past TSMC's biggest business.

The smartphone marketplace has begun to recover, and smartphones wide represented 30% of TSMC's third-quarter sales. This is acknowledgment successful portion to the occurrence of Apple's iPhone 17. Just past week, the institution reported a quarterly gross grounds that grew 8% twelvemonth implicit twelvemonth to $102.5 billion. CEO Tim Cook predicted that the December 4th would beryllium the biggest successful its history. Apple has historically been 1 of TSMC's biggest customers, accounting for 24% of its gross successful 2024. This suggests that TSMC's bequest smartphone conception has begun to vigor up.