TSMC Tops Samsung in Profit as AI Chip Demand Soars

TSMC Tops Samsung in Profit as AI Chip Demand Soars

TSMC’s record $33.73B sales, 35% profit surge highlight AI chip dominance

Taiwan Semiconductor Manufacturing Co. (TSMC), the global leader in foundry (semiconductor contract manufacturing), achieved record-high sales and profits in the fourth quarter of last year (October–December). This marks the third consecutive quarter of breaking records since the second quarter of last year. Driven by this momentum, the company recorded its highest-ever annual sales and profits for the year 2025. The results stem from TSMC’s monopoly on orders from major high-performance AI chip designers such as NVIDIA and AMD, amid accelerating explosive demand for AI semiconductors.

TSMC announced on the 15th that its fourth-quarter sales for last year increased by 21% year-on-year to $33.73 billion (approximately 49 trillion won), with net profit surging by 35% to $16.3 billion. Operating profit stood at $18.215 billion. This figure surpassed not only Samsung Electronics’ operating profit of $13.8 billion in the same period last year but also the company’s previous quarterly record of $16.1 billion set in the third quarter of 2018. TSMC projected a 30% sales increase for this year. A semiconductor industry insider stated, “High growth is expected to continue as revenue from cutting-edge processes begins to be fully reflected.”

◇Big Tech Companies Line Up for ‘More Chips’… 54% of TSMC’s Revenue Turns to Profit

TSMC, which operates under a single foundry business model, generates sales at about half the level of Samsung Electronics (93 trillion won in the fourth quarter of last year), a company that spans semiconductor, smartphone, and home appliance businesses. Nevertheless, TSMC’s ability to surpass Samsung Electronics’ operating profit is due to its high-profit structure, retaining over half (54%) of its revenue. Considering that typical large manufacturing and IT hardware companies have operating profit margins of only 5–15%, and even software companies, which earn money more efficiently, operate at 20–30%, TSMC’s profitability is overwhelming. The company’s high profits stem from the majority of its revenue coming from high-value-added advanced processes, compounded by a ‘supplier-dominated’ market where customers line up due to the recent surge in AI demand. Additionally, Taiwan’s government support, including various tax benefits and R&D cost subsidies, is cited as a key reason for TSMC’s exceptionally high profitability.

According to TSMC, sales from its latest 3-nanometer process accounted for 28% of total revenue in the fourth quarter of last year, up 3 percentage points from the previous quarter, marking a record high. In foundry processes, a lower number indicates more advanced technology. The 3-nanometer process is the ‘top-tier line’ primarily producing the latest AI semiconductors and flagship mobile chips. With an overwhelming market share leaving no room for competitors, profitability is inevitably higher. This means high-value-added advanced products like AI semiconductors are simultaneously driving TSMC’s revenue growth and profitability expansion.

◇TSMC Rides the AI Boom

In reality, the proportion of AI semiconductors in TSMC’s revenue is gradually increasing. Analysts note that Apple, traditionally TSMC’s largest customer accounting for 22–25% of sales in 2024, saw its share drop to around 20% last year. Meanwhile, NVIDIA’s share, which was around 10% in 2024, has been steadily rising. Some forecasts suggest it could reach levels comparable to Apple’s within this year.

In TSMC’s advanced packaging (CoWoS, which involves stacking multiple semiconductor wafers onto a single substrate) lines, NVIDIA is reported to have already secured over half of the total production capacity. There are analyses suggesting that AI GPUs (graphics processing units) for the next two years are in a ‘sold-out’ state.

IT specialist media *The Information* stated,

Demand for cutting-edge chips is three times TSMC’s production capacity,

Adding,

Orders are pouring in from NVIDIA, Google, Broadcom, and others, but the company is struggling to meet the demand.

TSMC is strengthening its market dominance in the next-generation 2-nanometer process. Mass production began in the fourth quarter of last year, and sales from this sector are expected to be fully reflected in performance starting this year. TSMC’s 2-nanometer process yield is reported to be between 70–90%, more stable than Samsung Electronics’. Dedicated 2-nanometer lines have also seen multi-year orders pre-sold based on long-term contracts with key customers like Apple and NVIDIA. On the same day, TSMC projected first-quarter sales for this year to grow for the ninth consecutive quarter to between $34.6 billion and $35.8 billion.

◇New U.S. Factories… Profitability Concerns

To solidify its ‘throne’ with a 70% share of the global foundry market, TSMC plans to focus multi-billion-dollar equipment investments on expanding 2-nanometer and advanced packaging capabilities. However, some express concerns that profitability could decline due to the expansion of production facilities in the U.S. The Taiwanese government has been negotiating with the U.S. to lower reciprocal tariffs from 20% to 15% on the condition that TSMC establishes five semiconductor factories in Arizona. Semiconductor production costs at TSMC’s U.S. plants are reported to be about 2.4 times higher than in Taiwan, with labor and material costs also double. If TSMC fully operates the five U.S. factories, its current gross profit margin (in the 60% range) is expected to drop to around 53% in the long term.

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TSMC Tops Samsung in Profit as AI Chip Demand Soars, source