Chips, Darling, Simply Chips

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One really must keep abreast of these things, mustn’t one? The sheer vulgarity of depending on… well, everything. And in this modern age, “everything” rather boils down to semiconductors. There are, naturally, only two entities one need concern oneself with. ASML, of course – those clever Dutch chaps with their lithography machines – and then, rather more importantly, Taiwan Semiconductor Manufacturing. (TSM +3.20%) – a name which, frankly, lacks a certain panache, but never mind.

One has touched upon Taiwan Semiconductor before, in comparison to the rather plodding Intel, but the company truly warrants a moment’s undivided attention. It controls, as of Q3 2025, a staggering 72% of the pure foundry semiconductor market. Really, it’s almost frightfully dominant, isn’t it? One wonders if they’re not slightly bored with it all.

The World’s Semiconductor Factory, or a Very Busy Beehive

So many companies design these little chips, but precious few actually make them. They’re “fabless,” you see – a rather clumsy term, but one gathers the meaning. Taiwan Semiconductor, however, does the messy business of actual production. They cater to the likes of Apple and Nvidia – who account for 25% and 11% of their revenue respectively – and seem to do so with a minimum of fuss.

The numbers, naturally, are rather impressive. $122.42 billion in revenue for 2025, a 36% increase over the previous year. A gross margin of 59.9%, operating margin of 50.8% – up a few basis points, which, while hardly earth-shattering, is perfectly respectable. And, rather cleverly, they’ve managed to reduce capital expenditures by 1.3% in Q4 2025, whilst simultaneously increasing free cash flow by 42%. One does admire efficiency.

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They anticipate even greater profitability, targeting gross and operating margins of 63-65% and 54-56% respectively for Q1 2026. A rather bullish outlook, wouldn’t you say? And they have a net cash position of $88 billion against a mere $31.6 billion in debt. They’re not simply hoarding the funds, naturally. They’re expanding their global footprint with alarming speed.

Phoenix, Arizona, and a Touch of American Pragmatism

They’ve already invested $165 billion in a gigantic factory in Phoenix, Arizona, and are planning an expansion to be completed in 2028. It’s a shrewd move, of course, bypassing some of those tiresome Trump-era tariffs. The recent agreement with Washington, reducing tariffs from 20% to 15%, simply confirms what any sensible strategist already knew.

In return, Taiwan Semiconductor, along with other Taiwanese companies, will invest $250 billion in American production capacity. It’s all rather… predictable, isn’t it? The U.S. government, having belatedly realised the strategic importance of semiconductors – the CHIPS and Science Act of 2022 being a rather obvious attempt to catch up – is now throwing money at the problem. One suspects it’s less about genuine innovation and more about avoiding embarrassment.

Taiwan Semiconductor isn’t quite the monopoly ASML enjoys – Samsung and Intel offer some competition – but neither comes close to their manufacturing capabilities. Which, ultimately, is what matters. It makes them absolutely critical to the tech industry, and rather suggests their growth streak will continue. One wouldn’t dream of shorting the stock, naturally. It would be frightfully vulgar.

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2026-02-02 19:32