3. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders In Q2 2024: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest contract chip manufacturer. The firm makes and sells chips for other companies, and it enjoys a distinct competitive edge over rivals through its process technologies, volumes, and yields. These are three key determinants of any semiconductor firm’s performance, and require billions of dollars in capital investment and years of research to master. Consequently, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) has a wide moat in its industry which is unlikely to be matched by any new entrants. However, key threats in the form of geopolitical conflict in its manufacturing hub Taiwan, and Intel Corporation’s aggressive approach towards developing the 18A process node can change the narrative for Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) by quite a bit. This is especially due to the fact that the firm currently plans to produce advanced 2 nanometer chips in America only by 2028, while Intel is aiming to make similar chips next year at the earliest.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s management shared key details about its US chip making facilities during the Q3 2024 earnings call:
“Next, let me talk about our global manufacturing footprint update. TSMC’s mission is to be the trusted technology and capacity provider of the global logic IC industry for years to come. All of our overseas decisions are based on our customers’ needs.
They value some geographic flexibility and necessary level of government support. This is also to maximize the value of our shareholders. In Arizona, we have received strong commitment and support from our U.S. customers and the U.S. federal, state, and city governments and have made significant progress in the past several months. Our plan to build three fabs, will help create greater economies of scale, as each of our fabs in Arizona will have a clean room area that is approximately double the size of a typical logical fab. Our first fab entered engineered wafer production in April with 4-nanometer process technology, and the result is highly satisfactory with a very good yield. This is an important operational milestone for TSMC and our customers, demonstrating TSMC’s strong manufacturing capability and execution.
We now expect volume production of our first fab to start in the beginning of 2025 and are confident to deliver same level of manufacturing quality and reliability from our fab in Arizona as from our fabs in Taiwan. Our second and third fabs will utilize more advanced technologies based on our customers’ needs. The second fab is scheduled to begin volume production in 2028, and our third fab will begin production by the end of the decade. Thus, TSMC will continue to play a critical and integral role in enabling our customers’ success while remaining a key partner and enabler of the U.S. semiconductor industry.”
