TSMC Now Holds 72.5 Per Cent of the Global Foundry Market, and August Was Its Best Month Ever

Taiwan Semiconductor Manufacturing Company posted record monthly revenue in August, which is the clearest available measure of how much demand the AI boom is generating for advanced chips.

TSMC reported 514.8 billion New Taiwan dollars, roughly 16.35 billion US dollars, for the month. That is a 53.3 per cent increase on the same month last year and a 10.1 per cent rise on July.

It extends the company's run of year-on-year monthly revenue growth to four consecutive months.

Where the demand comes from

The driver is the computing requirement of generative AI and adjacent applications, which has moved from a technology story to a construction one.

Technology companies are spending billions on data centres and accelerators. Every one of those requires the most advanced manufacturing processes available to produce the processors that go inside, and there is a very short list of places that can do it.

TSMC signalled the direction in July. On its second-quarter earnings call the company described AI-related demand as extremely robust, which in the language of an earnings call is close to shouting.

The financials bear it out. Second-quarter profit rose more than 77 per cent year on year, and the company projected third-quarter revenue of between 44.6 and 45.8 billion dollars.

Its closest competitor holds 5.9 per cent of the market

The number that matters most

Revenue growth is the headline. Market share is the story.

According to TrendForce, TSMC controlled 72.5 per cent of the global foundry market in the second quarter.

Samsung Foundry, the nearest competitor, held 5.9 per cent. SMIC, the Chinese manufacturer, was third with 5.4 per cent.

That is not a leading position in a competitive market. It is close to a single point of production for the most advanced semiconductors in the world, and the gap between first and second is wider than second, third and most of the rest combined.

What that concentration means

Every argument about AI capacity eventually resolves into this.

Model developers compete on research. Cloud providers compete on infrastructure. Chip designers compete on architecture. All of them ultimately queue at the same foundries, and one company allocates roughly three quarters of the available capacity.

That gives TSMC unusual pricing power and makes its production schedule a constraint on the entire industry's plans. A company announcing a data centre buildout is announcing an intention to be allocated capacity it does not control.

It also concentrates a very large amount of geopolitical risk in one location, which is understood by everybody involved and has not yet changed anybody's behaviour, because there is nowhere else to go at this process node.

Why nobody can simply build an alternative

The obvious response to a 72.5 per cent share is that somebody should compete, and the reason nobody has is capital and time rather than will.

A leading-edge fabrication plant costs in the tens of billions of dollars and takes years to bring into production, during which the process node it was designed for moves on. The expertise required sits in a workforce that has been accumulating it for decades in one place.

Governments have responded with subsidy programmes on several continents, and those will eventually produce capacity. They will not produce it on the timescale the current demand is running at, which is why the queue forms where it does.

The market reaction

Shares closed 0.61 per cent lower on Thursday, before the August figures were published.

That is worth noting mainly for what it says about expectations. A company posting record revenue, 53 per cent growth and three quarters of its market is not being rewarded day to day, because the market has already priced the boom and is now watching for the first sign that it is slowing.

On these numbers, it is not.