TSMC stock represents the world’s largest dedicated chip foundry, and the position is hard to copy for one measurable reason. In the second quarter of 2026, processes at 7 nanometers and below produced 77% of the company’s wafer revenue, per its July 16 earnings release.
No competitor reports a leading-edge mix anywhere near that. The same filings show what holding the lead costs, and where the business is exposed.
A foundry that sells capacity, not chips
Taiwan Semiconductor Manufacturing Company pioneered the pure-play foundry model in 1987. It builds silicon to customer designs and puts no branded chip of its own into the market.
Wafer fabrication accounted for roughly 86% of net revenue in 2025, according to the annual report on Form 20-F. Packaging and testing, mask making, design services and royalty income make up the rest.
Scale shows in the catalogue. The company says it deployed 305 distinct process technologies and manufactured 12,682 products for 534 customers during 2025.
The node ladder rivals cannot skip
Second-quarter wafer revenue split 33% to 5-nanometer, 30% to 3-nanometer, 11% to 7-nanometer and 3% to 2-nanometer. Two-nanometer entered volume production in 2025, and the 20-F says 16-angstrom risk production is expected during 2026.
Each rung costs money long before it earns any. Capital expenditures reached NT$1,272,411 million in 2025 against NT$956,007 million in 2024, aimed mainly at 2, 3 and 5-nanometer capacity plus advanced packaging.
Research spending rose 20.7% in 2025 on work at 10, 14 and 16 angstroms. That backlog of learning is why Intel’s push back into contract manufacturing is a multi-year project rather than a quarter-to-quarter fight.
Margins a commodity supplier would not have
Second-quarter revenue was US$40.20 billion, up 33.7% from a year earlier. Gross margin came in at 67.7% and operating margin at 60.3%.
The annual trend runs the same way, with an operating margin of 50.8% in 2025 against 45.7% in 2024 and 42.6% in 2023. Management guided third-quarter revenue to between US$44.6 billion and US$45.8 billion at a 65% to 67% gross margin.
Those figures describe a supplier that sets terms rather than one that absorbs them, which is unusual given how many companies designing AI accelerators depend on this single source of capacity.
Where the position is fragile
Concentration is the counterweight. The ten largest customers produced 78% of net revenue in 2025, up from 76% in 2024 and 70% in 2023, and they held 84% of accounts receivable at year end.
The single largest customer contributed 19%, the second largest 17%. The company’s own forward-looking statements list the political stability of its local region among the factors that could change results materially.
Weighing TSMC against the rest of the listed chipmakers means trading breadth of customers for depth of process lead. None of that is a view on the share price.
Two numbers the next report will settle
Watch the 2-nanometer share of wafer revenue, which management flagged for a steep ramp. Then check whether gross margin lands inside the guided 65% to 67% band.
Is TSM the same company as TSMC?
Yes. TSM is the New York Stock Exchange ticker for the American depositary shares of Taiwan Semiconductor Manufacturing Company, which also trades in Taipei under 2330.
Who is TSMC’s biggest customer?
The 20-F does not name it. It discloses only that the largest customer accounted for 19% of net revenue in 2025, down from 22% in 2024 and 25% in 2023.
What does 2-nanometer mean for TSMC revenue today?
Little so far. Two-nanometer was 3% of wafer revenue in the second quarter of 2026, against 33% for 5-nanometer, though it only entered volume production in 2025.
Andie is an IT lover and in his free time he likes to make tutorials dedicated to those interested in Android programming. Continually seeking for challenges he likes to test his skills and knowledge. Is thrilled to be part of the S4Tips team and hopes that together we can contribute to community development.