TSMC, the world's largest foundry (semiconductor contract manufacturing) corporation, has reinforced its leading position, and forecasts suggest that its stock price could rise by nearly 50% within the next year. While competitors like Samsung Electronics, the second-largest foundry in the market, struggle with yield issues in advanced processes, TSMC is widening the gap by preempting orders for next-generation 2-nanometer processes based on the stability of its 3-nanometer process (1 nanometer is one-billionth of a meter).
◇ Three pillars of AI demand, loyal customers, and pricing power… securing a virtuous cycle of growth
According to industry sources on the 19th, global investment bank Morgan Stanley maintained its 12-month target price for TSMC at 1,288 New Taiwan dollars (about 59,890 won) in a recent report, stating that in an optimistic scenario, it could rise to 1,560 New Taiwan dollars (about 72,540 won). This analysis indicates a potential rise of up to 50% compared to the closing price of 1,035 New Taiwan dollars (about 48,330 won) on that day.
Morgan Stanley noted that TSMC is simultaneously operating growth engines that competitors cannot easily replicate. Particularly, as the cloud AI semiconductor market is rapidly growing at 30-40% annually, orders from major AI chip corporations like NVIDIA are concentrating on TSMC. In fact, TSMC is attracting even its competitors as customers. There are expectations in the industry that Intel, which is competing in the foundry market, will outsource the production of its next-generation 'Nova Lake' central processing units (CPUs) and graphics processing units (GPUs) to TSMC's 2-nanometer process.
Pricing power based on demand advantage is also cited as a competitive strength of TSMC. TSMC plans to increase wafer average prices by 3-5% starting next year and to adjust prices of products produced at its Arizona plant by up to 10%. Charlie Chan, head of semiconductor research at Morgan Stanley, assessed that 'TSMC is continuing structural growth based on the three pillars of AI demand, customer loyalty, and process technology leadership,' adding that 'this growth driver will be valid beyond short-term performance into next year and beyond.'
◇ Market share, yield, and customer acquisition… disparities appearing in all indicators
In the semiconductor industry, the prevailing outlook is that TSMC will maintain a dominant monopoly based on its 'super gap' technological capabilities for some time. According to market research firm TrendForce, in the first quarter of this year, TSMC's global foundry market share was 67.6%, widening the gap with second-place Samsung Electronics (7.7%) to an all-time high. With Samsung Electronics recording its lowest market share ever, the gap with China's largest foundry, SMIC, is only 1.7 percentage points (P), putting its second-place position at risk.
The technological gap is becoming more evident in actual productivity and customer acquisition competition. The industry believes that the 3-nanometer process served as a turning point that widened the gap between TSMC and Samsung Electronics. TSMC achieved a 100% operational rate just five quarters after starting mass production of the 3-nanometer process. In contrast, Samsung Electronics has struggled with securing yields despite being the first in the industry to introduce next-generation Gate-All-Around (GAA) technology and has faced difficulties in attracting major customers. Meanwhile, TSMC has secured major big tech corporations such as Apple, NVIDIA, and AMD as customers, while Qualcomm and Google, which had relied on Samsung Foundry for mobile chip production, have also switched their supply chains to TSMC.
There is a strong consensus in the industry that this gap is likely to continue with the next-generation 2-nanometer process. Both TSMC and Samsung Electronics are targeting mass production of the 2-nanometer process in the second half of this year, but TSMC has already secured all volumes of Apple's 'iPhone 18' series for the 2-nanometer process, entering a virtuous cycle structure. The industry assesses TSMC’s 2-nanometer yield at around 60-70%, while Samsung Electronics is reported to be at around 40%.
In the advanced packaging field, which is dubbed the game changer of the AI era, TSMC currently holds market leadership. The price of a single 3-nanometer wafer reaches $23,000 (approximately 32 million won), so the reliability of packaging is one of the key criteria for customer selection. TSMC is using its proprietary advanced packaging technology, CoWoS (Chip on Wafer on Substrate), to produce AI chips for NVIDIA and has effectively established a dominant position in the high-performance semiconductor packaging market. Furthermore, the company plans to construct a dedicated factory for next-generation WMCM (wafer-level multi-chip module) packaging, which integrates multiple chips into one, to also take on production of Apple's AI chips.
An industry official remarked that 'the know-how and data accumulated by TSMC from mass production of AI chips for the most demanding customers, NVIDIA and Apple, are weapons that no other company can replicate' and added, 'While Intel is also advancing its own 3D packaging technology and Samsung Electronics is likewise pursuing its own 2.5D packaging technology, catching up to TSMC's 'comprehensive stability', which reliably supplies yields of proven chips (front-end) while also taking responsibility for packaging (back-end), would require demonstrating a completely different dimension of stability.'