In the rapidly evolving semiconductor industry, two key players stand out: Taiwan Semiconductor Manufacturing Company (TSMC) and ASML Holding. TSMC is recognized as the largest contract chipmaker globally, while ASML is the leading producer of lithography systems essential for chip manufacturing.
Understanding TSMC and ASML
TSMC focuses on high-end chip production, utilizing cutting-edge technologies, including extreme ultraviolet (EUV) lithography. ASML is the sole manufacturer of these EUV systems, which allow for the creation of some of the smallest and most dense chips available today.
Recent Performance of TSMC
- Revenue Growth: TSMC’s annual revenue is projected to grow at a compound annual growth rate (CAGR) of 24% from 2020 to 2024.
- Earnings per Share (EPS): EPS is expected to increase at a CAGR of 19% during the same period.
- Market Share: TSMC services prominent fabless chipmakers like Nvidia, AMD, and Apple, significantly boosting its market position.
In the third quarter of 2025, TSMC reported that 60% of its revenue stemmed from its advanced 3nm and 5nm chips.
- Revenue Sources: TSMC generates 57% of its revenue from high-performance computing (HPC), 30% from smartphones, and the remainder from other sectors.
- Market Cap: TSMC’s market capitalization stands at $1.44 trillion.
ASML’s Position in the Market
ASML has also shown strong growth. From 2020 to 2024, its revenue and EPS are expected to rise at a CAGR of 19% and 23%, respectively.
- Profitability and Pricing Power: ASML controls a niche market with its high-priced EUV systems, which cost over $200 million each.
- Market Dynamics: Despite its strength, ASML faces challenges, particularly from export restrictions toward China.
- Market Cap: ASML maintains a market capitalization of around $389 billion.
Investment Outlook: TSMC vs. ASML
As the semiconductor market continues to expand, choosing between TSMC and ASML depends on several factors. TSMC appears to be a more diversified investment. With a less volatile environment and rapid growth trajectories, TSMC presents a lower valuation at 19 times its forward earnings.
In contrast, ASML’s stock trades at a higher valuation of 34 times next year’s earnings, and potential regulatory challenges could hinder its growth prospects. Analysts project TSMC’s revenue will keep increasing, bolstered by favorable conditions in AI and computing markets.
Conclusion
Both TSMC and ASML are integral components of the semiconductor industry. However, TSMC’s broader market reach, faster growth, and favorable valuation suggest it may be the superior investment choice currently.
