Origins
Morris Chang founded TSMC in 1987, with support from the Taiwanese government. At the time, most chip companies both designed and manufactured their own products. TSMC's idea was to offer manufacturing as a service. That made it possible for a new kind of company, the fabless chip designer, to grow without building factories.
How the foundry model works
- A customer designs a chip using design software and TSMC's process rules.
- TSMC turns that design into photomasks and manufactures it on silicon wafers.
- Finished wafers are tested and either packaged by TSMC or shipped to packaging partners.
- The customer sells the finished chip under its own brand.
TSMC earns money per wafer. More advanced manufacturing processes cost more per wafer, so the mix of technologies it sells matters as much as the volume.
Process nodes
Foundries name their manufacturing generations with labels like "5nm" or "3nm". These names no longer match any single physical measurement on the chip. Treat them as generation labels: a smaller number from the same foundry generally means denser, more power-efficient transistors. Comparing node names between different foundries is unreliable.
What protects it
- Neutrality. Because it does not sell its own chips, customers are less worried about sharing their designs.
- Process leadership and yield. Getting a high share of working chips from each wafer takes years of learning.
- Capital intensity. Leading-edge fabs cost tens of billions of dollars, which few companies can fund.
Dependencies and risks
Most of its advanced manufacturing is in Taiwan, and the company has been building additional fabs in other countries. It relies on specialised equipment suppliers, such as makers of lithography machines, and on a stable supply of water and power. Its annual report sets out these risks in detail.
This page explains how a company is organised. It is not investment advice and says nothing about whether a share is worth buying or selling.