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In-Depth SWOT Analysis of TSMC – A Taiwanese Multinational Semiconductor Manufacturer

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Last time we did a SWOT analysis of Adobe, an American multinational computer software company. Today, we will do an extensive SWOT Analysis of TSMC to identify the company’s performance.

Taiwan semiconductor manufacturing company is one of the world’s top semiconductor manufacturers. Its business model exclusively focuses on manufacturing clients’ semiconductor needs. Thus, the key to TSMC’s success has always been to focus on its client’s success. 

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In today’s blog, we are going to do an extensive SWOT Analysis of TSMC and find out the company’s overall performance. Before we begin our analysis let’s have a look at its founding, products, financial status and competitors.

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About TSMC

SWOT Analysis of TSMC - TSMC Semiconductor

TSMC was established in the year 1987 with its headquarters in Hsinchu Science Park, Taiwan. TSMC pioneered its business model by exclusively focussing on manufacturing semiconductors for its clients like AMD, Apple, ARM, Broadcom, Marvell, MediaTek, and TSMC. Its foundry business model has made it rise globally and it is since its inception that TSMC is one of the world’s leading semiconductor foundries.

TSMC makes semiconductors that are used in a variety of end markets such as mobile devices, high-performance computing, automotive electronics, and the internet of things. This in turn enables TSMC to maintain a higher level of profitability and get healthy returns for future investment. 

In May 2020, TSMC set forth to build and operate a semiconductor fab in the United States to support the customers and partners as well as to attract global talent. TSMC has its offices located in North America, Europe, Japan, China, and South Korea. And the company is also listed on Taiwan Stock Exchange.

Quick Stats on TSMC
Founder Morris Chang
Year Founded 1987
Origin Taiwan
No. of Employees 56,500+
Company Type Public
Market Cap $564.16 Billion (2022)
Annual Revenue NT$1.33 Trillion (2020)
Net Income/ Profit NT$517.89 Billion (2020)

 

SWOT Analysis of TSMC - SoIC Chips


Products of TSMC

  • Semiconductors
  • GPUs
  • Graphics cards
  • Consumer electronics
  • Computer hardware


Competitors of TSMC

TSMC is competing on a global level with many other well-known companies in the information technology sector. The top 5 competitors of TSMC are

  • MediaTek
  • Qualcomm
  • Samsung
  • Intel Corporation
  • Foxconn


As we discussed the company’s core business, let’s begin with the SWOT Analysis of TSMC.


SWOT Analysis of TSMC

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. SWOT Analysis is a tool that helps to analyse where the company is performing well, where it lacks, how it can grow in future and what are things it has to beware of. It helps the internal as well as external users to compare the company with its competitors and industry as a whole.

To better understand the SWOT analysis of TSMC, refer to the infographics below:

SWOT Analysis of TSMC - SWOT Infographics of TSMC

So let us go ahead and first have a glance at the strengths of TSMC from the SWOT analysis of TSMC.

Strengths of TSMC 

Strengths are the factors that contribute to the success of the company. Strengths are those features and key areas where the company is performing better than its competitors. Following are the strengths of TSMC:

  • First Mover Advantage: TSMC enjoys a first-mover advantage in terms of the world’s first dedicated semiconductor foundry and has long been the leading company in its field.
  • Sells to Leading Companies: Big companies like AMD, Apple, ARM, Broadcom, Marvell, MediaTek, and Nvidia through which the computer and technological world is known and is operating are the main customers of TSMC. 
  • Research & Development: The company is always ahead in terms of expanding its R&D operations and its production capacity. As recently TSMC planned to increase its R&D expenditure by 30% and expand its capacity by 30% to meet strong market demand.
  • Market Capitalization: TSMC has surpassed Intel in terms of market capitalization in 2017 hitting US$168.4 Billion, with Intel at US$165.7 Billion. Also, TSMC became the world’s 10th most valuable company, with a market capitalization of US$410 Billion.
  • Strong Financial Position: TSMC has a strong financial position and large accumulated profits that can be used to make further capital investments.
  • Intellectual Property Rights: The company owns several intellectual property rights that include patents and trademarks. This allows the company exclusive rights over its products and competitors can’t copy or reverse engineer them.
  • Product Quality: Its products – semiconductors and chipsets have good quality which smoothens the experience of users, which is why it is still valued by the customers and increases brand loyalty. This helps to fulfil customer satisfaction as they find it as a good value for the money they pay and improves their performance in the competitive market.


Weaknesses of TSMC

Weaknesses are the characteristics of the company that places it at a disadvantage relative to others. The weaknesses stop the company from performing at an optimum level and become barriers to achieving goals.

  • Lack of Critical Talent: TSMC is facing problems in attracting talent with appropriate technical know-how as it is struggling in the field of AI and machine learning.
  • Low Return on Investment: Even though TSMC enjoys the advantage of having the most stable balance sheet, it needs to put a reflection on one metric that is “Return on invested capital” which indirectly indicates low returns on investment.
  • Shortage of Chipset: The company is facing short of chipset internally and externally due to the Covid-19 wave. TSMC reports that it will continue facing this situation until the year-end 2024.
  • Competitor’s R&D: Even though the company is spending a certain amount on research and development, it is still less than what its competitors spend on it and therefore they have a significant advantage of innovative products and more market share.
  • Track Record on Environment Consideration: The production of semiconductors produces carbon emissions due to which TSMCs records higher environmental considerations.


Opportunities for TSMC
 

Opportunities are the favourable external factors that give the company a competitive advantage to improve its performance and increase profit.

  • Changing Technology Landscape: AI and Machine learning are completely transforming the IT industry, TSMC should focus on developments of semiconductors and chipsets using the latest technologies to improve its efficiencies and lower its cost.
  • Improve its Digital Presence: Being one of the top producers of semiconductors in the world, TSMC should take the opportunity of the booming digital era and build a stronger relationship with its customers online using digital marketing strategies. Having a strong digital presence creates a lasting impression and attracts new customers.

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  • Establish New Subsidiary: TSMC is planning to establish a new subsidiary with  JASM – Japan Advanced Semiconductor Manufacturing in Japan. They both are planning to manufacture 22 and 28-nanometer processes which can bring a revolution in the semiconductor industry. 
  • Rise in Gaming Sector: There is a significant increase in the use of gaming consoles such as the all-new PS5 and Xbox which requires high-end gaming chipsets, graphics and drivers, this becomes an opportunity for TSMC to produce the required quality and take the contract for installations.
  • Economic Recovery: Economic recovery and rising consumer spending after years of recession and slow industrial growth are opportunities for TSMC to attract new customers and increase market share.


Threats of TSMC

Threats are the unfavourable factors that could harm the functioning of the company. 

  • Increasing Cost Component: The cost component for semiconductors and chipsets of TSMC is increasing day by day because of environmental regulations. The government imposes higher environmental taxes which in turn increases the cost of packing and logistics also.
  • International Geo-Political Factors: TSMC should closely focus on various events impacting international business and should make them integral to strategy making as Russian Sanction, Foreign Exchange Crisis, Inflation in Venezuela, etc.
  • User Experience: As TSMC works on improving the performance and user mobile experience with its semiconductors and chipsets. If somehow the client’s users face any lagging and hanging issues it directly questions the accountability of TSMC.
  • Quantitative Increases in Commodities: This could jeopardize TSMC’s profitability. A shortage of skilled labour in certain global markets threatens TSMC’s continued earnings growth in the market.
  • Patent Disputes: TSMC is facing several patent disputes for the last 3 years, the company GlobalFoundries is imposing allegations against TSMC for false patents. However, the dispute is resolved for the next 10 years.


This ends our SWOT analysis of TSMC. Let us conclude our learning below.

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To Conclude

Taiwan semiconductor manufacturing company is one of the world’s leading semiconductor chip foundries. As discussed above the company follows a customer-first approach which aids to the success of the company. Although TSMC faces huge competition from various other companies such as Intel, Samsung, and many others, still TSMC has been continuously making efforts to stay at the top in the IT industry.

TSMC has beaten almost all its competitors and the reason behind this is its effective marketing strategy. Nowadays in this era of digitalization, digital marketing plays a vital role in the success of every company. An organization can win over its customers with better marketing efforts. If you are interested in learning about digital marketing and enhancing your skills, check out IIDE’s 3 Month Advanced Online Digital Marketing Course to know more.

We hope this blog on the SWOT analysis of TSMC has given you a good insight into the company’s strengths, weaknesses, opportunities and threats.

If you like to read such insightful and extensive analyses of companies just like the SWOT analysis of TSMC then you can find more such interesting case studies on our IIDE’s knowledge portal.

Thank you for taking your time out to read this, hope you found the case study on the SWOT analysis of TSMC informative and insightful. Share your views on it in the comments section below.

Lead Trainer & Head of Learning & Development at IIDE

Leads the Learning & Development segment at IIDE. He is a Content Marketing Expert and has trained 6000+ students and working professionals on various topics of Digital Marketing. He has been a guest speaker at prominent colleges in India including IIMs......[Read full bio]

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