$TSM (-0,66 %) The second largest position in my portfolio after the broadly diversified ETFs is a real giant that many private investors hardly know - even though it is in almost every iPhone, Nvidia chip and Apple Mac: Taiwan Semiconductor Manufacturing Companyin short TSMC. I currently hold 35 ADRs, bought at €103.37, which now stand at €194.10 - an increase of around +87 % or 3.175,50 € in my portfolio. So it's time for a thorough portfolio check: What makes TSMC special? Should I buy more now? Or is it better to sell? Hold? Or perhaps slowly add to it with a savings plan?
The business model - Invisible, but indispensable
TSMC is not a traditional tech company with its own brand or products - but the pacemaker of the semiconductor world. pacemaker of the semiconductor world. As a pure contract manufacturer, TSMC produces chips for almost all the big names: Apple (approx. 25 % share of sales), Nvidia (11 %)AMD, Qualcomm, Broadcom and many more. This means that TSMC does not design any chips itself, but instead converts the customers' circuit diagrams into silicon - with a precision that hardly anyone else can match. This makes TSMC the world market leader in the foundry market with a market share of over 60%.
Particularly in the area of state-of-the-art production (3 nm, soon 2 nm), there is practically no competition. Samsung is getting closer technologically, but suffers from yield problems. Intel is also trying its hand as a foundry with "IDM 2.0", but is still miles away from TSMC. And Chinese suppliers such as SMIC are lagging generations behind - and are also being held back by US sanctions.
In short: If you want to be at the forefront - be it for iPhones, AI GPUs or autonomous cars - there is no way around TSMC.
Facts, figures and data - Impressive margins and growth
TSMC generated sales of around NT$ 2,894 billion in 2024, an increase of 34% after a slight decline in 2023. Net profit is over NT$ 1,173 billion. The gross margin remains at almost 59 % strong, the net margin is stable at around 40 % - which is an announcement in the industry.
In the DCF model with conservative assumptions (8 % growth, 10 % WACC, 3 % terminal growth), I arrive at an intrinsic value of around 236 billion US dollars - which is significantly below the current market capitalization of ~US$500 billion. But: The model is deliberately cautious. If you calculate more optimistically (12% growth, 8% WACC), you will quickly arrive in the region of $450-600 billion - i.e. where the market currently places TSMC.
Opportunities - Why TSMC remains indispensable
- AI boom: Nvidia & Co. need masses of chips. They come from a single source: TSMC.
- Apple: Every A processor comes from TSMC. Even the M chips in Macs.
- Technological advantageTSMC is the only manufacturer that mass produces 3 nm. 2 nm is scheduled for 2025/26.
- Global expansion: New plants in the USA, Japan and soon Germany - politically supported and strategically sensible.
- Strong balance sheetAlmost debt-free, with stable free cash flows and a reliable dividend.
Risks - The sword of Damocles is China
The biggest risk is obvious: Taiwan. A military conflict with China would have a massive impact on TSMC - in the worst case scenario, the factories would be shut down or destroyed to prevent them falling into Chinese hands. This is a low-probability, high-impact risk - but it is real.
On top of that:
- US export controlsthat force TSMC to impose restrictions (Huawei ban, delivery bans to China).
- Concentration on Apple and Nvidia - together account for over 35% of sales. Should one of the two jump ship or stumble, this would have an impact.
- CompetitionIntel and Samsung are catching up, albeit slowly. TSMC must maintain its lead - technologically and logistically.
My assessment - buy, hold, sell?
TSMC is a technical monopoly for the time being. No one can produce chips of this quality and quantity. The demand for AI, high-performance computing, smartphones, IoT and automotive chips will continue to grow in the coming years - and TSMC is the biggest beneficiary.
At the same time, the political risks are real. Anyone buying TSMC must be aware of this: In the worst-case scenario - should there be a war over Taiwan - the share price could plummet massively. That is the price for the growth potential.
Personally, I think so.
- I am up 87% and have TSMC as a strategic core position in my portfolio.
- I wouldn't buy more at the current level - the valuation is too sporty for me, especially in relation to the political risk.
- A savings plan? Conceivable. Especially when the share price starts to deflate again.
For me, TSMC remains a "buy the dip" candidate. Should the share price fall significantly again - e.g. due to general market panic or political uncertainty - I would consider buying more. Until then: keep your feet still, collect the dividend and watch the growth.
Not investment advice - just my personal opinion.
