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Taiwan Semiconductor Manufacturing Company Limited (TSM)
:TSM
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TSMC
(NYSE:TSM)
74Outperform
Positive Factors
AI Demand
TSMC set to benefit from strong AI demand; maintain Buy.
Strategic Expansion
TSMC announced an additional US$100bn investment, showcasing strong growth plans.
Technological Leadership
The expansion and progress in advanced nodes like N2/A16 and future phases indicate TSMC's commitment to maintaining technological leadership in the semiconductor industry.
Negative Factors
Cost and Talent Barriers
Execution challenges persist due to high labor costs, cultural differences, and a limited U.S. talent pool, posing barriers to the expansion.
Operational Challenges
Integrating another foundry's production lines is highly challenging due to differences in toolsets, configuration, and process flow, requiring significant operational hurdles to be overcome.
TSMC (TSM) vs. S&P 500 (SPY)
Market Cap
$738.53B
Dividend Yield1.23%
Average Volume (3M)16.74M
Price to Earnings (P/E)22.3
Beta (1Y)1.58
Revenue Growth29.98%
EPS Growth35.76%
CountryUS
Employees65,152
SectorTechnology
Sector Strength43
IndustrySemiconductors
Share Statistics
EPS (TTM)7.04
Shares Outstanding5,186,547,000
10 Day Avg. Volume14,563,848
30 Day Avg. Volume16,743,610
Financial Highlights & Ratios
PEG Ratio0.62
Price to Book (P/B)N/A
Price to Sales (P/S)13.95
Price to Cash Flow (P/CF)N/A
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$245.00Price Target Upside66.89% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering6
TSMC Business Overview & Revenue Model
Company DescriptionTaiwan Semiconductor Manufacturing Company Limited, together with its subsidiaries, manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally. It provides a range of wafer fabrication processes, including processes to manufacture complementary metal- oxide-semiconductor (CMOS) logic, mixed-signal, radio frequency, embedded memory, bipolar CMOS mixed-signal, and others. The company also offers customer and engineering support services; manufactures masks; and invests in technology start-up companies; researches, designs, develops, manufactures, packages, tests, and sells color filters; and provides investment services. Its products are used in high performance computing, smartphones, Internet of things, automotive, and digital consumer electronics. The company was incorporated in 1987 and is headquartered in Hsinchu City, Taiwan.
How the Company Makes MoneyTSMC makes money primarily through its semiconductor manufacturing services, which involve producing integrated circuits (ICs) for its clients based on their designs. The company's revenue model is based on a 'fabless' foundry model, where clients design the chips and TSMC fabricates them using advanced process technologies. TSMC's key revenue streams include wafer fabrication services, where clients pay for the production of semiconductor wafers, and technology licensing. The company's advanced technology nodes, such as 5nm and 7nm processes, are in high demand, allowing TSMC to charge premium prices for these cutting-edge manufacturing capabilities. TSMC's significant partnerships with major tech companies like Apple, AMD, and NVIDIA contribute to its earnings, as these companies rely heavily on TSMC's expertise and capacity to produce their high-performance and specialized chips.
TSMC Financial Statement Overview
Summary
TSMC shows strong financial performance with robust revenue growth and profitability. The income statement, balance sheet, and cash flow scores highlight efficient capital management, low financial risk, and substantial growth potential in the semiconductor industry.Income Statement
TSMC demonstrates outstanding revenue growth and profitability with a consistent upward trajectory. Gross Profit Margin and Net Profit Margin have significantly improved, showcasing operational efficiency. Revenue growth remains robust, indicating strong market demand and competitive positioning.95
Very Positive
Balance Sheet
The balance sheet is very strong, with a low Debt-to-Equity Ratio indicating conservative financial management. A high Return on Equity (ROE) emphasizes effective use of shareholder capital. The Equity Ratio is healthy, suggesting substantial equity financing.90
Very Positive
Cash Flow
Cash flow performance is impressive, with a solid Free Cash Flow Growth Rate and strong Operating Cash Flow to Net Income Ratio. The company demonstrates a healthy conversion of earnings into cash, supporting ongoing investments and financial flexibility.88
Very Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 2.89T | 2.16T | 2.26T | 1.59T | 1.34T | Gross Profit |
| 1.62T | 1.18T | 1.35T | 819.54B | 711.13B | EBIT |
| 1.32T | 921.47B | 1.12T | 649.98B | 566.78B | EBITDA |
| 1.98T | 1.45T | 1.59T | 1.09T | 918.55B | Net Income Common Stockholders |
| 1.17T | 838.50B | 992.92B | 592.36B | 510.74B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 2.42T | 1.69T | 1.59T | 1.21T | 802.15B | Total Assets |
| 6.69T | 5.53T | 4.96T | 3.73T | 2.76T | Total Debt |
| 986.46B | 956.26B | 888.17B | 749.07B | 365.19B | Net Debt |
| -1.14T | -509.17B | -454.64B | -315.92B | -294.98B | Total Liabilities |
| 2.37T | 2.05T | 2.00T | 1.55T | 910.09B | Stockholders Equity |
| 4.29T | 3.46T | 2.95T | 2.17T | 1.85T |
| Cash Flow | Free Cash Flow | |||
| 870.17B | 286.57B | 520.97B | 262.72B | 301.19B | Operating Cash Flow |
| 1.83T | 1.24T | 1.61T | 1.11T | 822.67B | Investing Cash Flow |
| -864.84B | -906.12B | -1.19T | -836.37B | -505.78B | Financing Cash Flow |
| -346.30B | -204.89B | -200.24B | 136.61B | -88.62B |
TSMC Technical Analysis
Negative
146.80
Price Trends
186.45
Negative
192.56
Negative
183.96
Negative
Market Momentum
-5.47
Negative
39.73
Neutral
23.92
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSM, the sentiment is Negative. The current price of 146.8 is below the 20-day moving average (MA) of 170.84, below the 50-day MA of 186.45, and below the 200-day MA of 183.96, indicating a bearish trend. The MACD of -5.47 indicates Negative momentum. The RSI at 39.73 is Neutral, neither overbought nor oversold. The STOCH value of 23.92 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSM.
TSMC Risk Analysis
TSMC disclosed 26 risk factors in its most recent earnings report. TSMC reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
TSMC Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $169.27B | 16.36 | 41.96% | 2.44% | 12.13% | 36.17% | |
75 Outperform | $2.48T | 34.65 | 119.18% | 0.04% | 114.20% | 146.26% | |
74 Outperform | $738.53B | 22.34 | 29.96% | 1.23% | 29.98% | 35.76% | |
72 Outperform | $152.00B | 85.49 | 2.89% | ― | 13.69% | 91.75% | |
65 Neutral | $149.41B | 31.60 | 28.25% | 3.24% | -10.72% | -26.60% | |
57 Neutral | $20.94B | 10.43 | -13.41% | 2.52% | 4.53% | -23.34% | |
52 Neutral | $97.81B | ― | -18.31% | 2.23% | -2.08% | -1212.72% |
* Technology Sector Average
Performance Comparison
TSM
TSMC
146.80
6.98
4.99%
AMD
Advanced Micro Devices
85.76
-84.66
-49.68%
INTC
Intel
19.85
-18.46
-48.19%
NVDA
Nvidia
94.31
6.33
7.19%
QCOM
Qualcomm
127.46
-40.70
-24.20%
TXN
Texas Instruments
151.39
-11.55
-7.09%
TSMC Earnings Call Summary
Earnings Call Date: Jan 16, 2025 | % Change Since: -28.80% | Next Earnings Date: Apr 17, 2025
Earnings Call Sentiment Positive
The earnings call highlighted strong growth in advanced technologies and high-performance computing, driven by robust AI demand and global expansion efforts. However, challenges remain with overseas fab costs and geopolitical risks. Despite these challenges, the overall outlook for 2025 is positive with significant growth expected.Highlights
Strong Revenue and Growth in Advanced Technologies
Fourth quarter revenue increased 14.3% sequentially, driven by demand for 3-nanometer and 5-nanometer technologies. Advanced technologies accounted for 74% of wafer revenue in Q4 and 69% for the full year, up from 58% in 2023.
Record Growth in High-Performance Computing (HPC) Segment
HPC revenue increased 19% quarter-over-quarter, accounting for 53% of Q4 revenue. On a full-year basis, HPC increased 58% year-on-year.
Improved Financial Performance
Full-year revenue increased 30% in USD terms to $90 billion. Gross margin improved by 1.7 percentage points to 56.1%, and EPS increased by 39.9% to TWD 45.25.
Positive Outlook for 2025
Expected revenue growth of close to mid-20% in USD terms for 2025, driven by AI demand and a mild recovery in other segments.
Expansion in Global Manufacturing
Successful ramp-up of the Arizona fab with production in Q4 2024, and ongoing expansion plans in Japan and Europe.
AI-Related Demand Surges
AI accelerator revenue accounted for mid-teens percent of 2024 total revenue, with expectations to double in 2025.
Lowlights
Challenges with Overseas Fab Costs
Overseas fabs, including in the U.S., are expected to contribute a 2% to 3% margin dilution annually over the next five years due to higher costs.
Impact of U.S. Export Restrictions
Potential risks from new U.S. restrictions on AI chip exports to China, though current analysis suggests the impact is manageable.
Decline in IoT and DCE Segments
Quarter-over-quarter IoT revenue decreased by 15%, and DCE decreased by 6% in Q4.
Company Guidance
During the Q4 2024 earnings call, TSMC provided detailed guidance for Q1 2025, projecting a revenue range between USD 25 billion and USD 25.8 billion, which reflects a 5.5% sequential decline but a 34.7% year-over-year increase at the midpoint. Gross margin is expected to be between 57% and 59%, while the operating margin is projected to be between 46.5% and 48.5%. The effective tax rate for 2025 is anticipated to be between 16% and 17%. TSMC also outlined its 2025 capital expenditure plans, with a budget of USD 38 billion to USD 42 billion, predominantly allocated to advanced process technologies. The company emphasized its focus on maintaining a long-term gross margin of 53% and higher, despite anticipated cost pressures from overseas expansion and inflationary impacts.Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.