NVDA - TSMC: By Far The Strongest Chip Company

2024-06-18 13:10:16 ET

Summary

• Recently Taiwan Semiconductor Manufacturing officials said that they were considering raising prices charged to NVIDIA.
• With a 60% market share in chip manufacturing, TSMC is the only company with enough manufacturing capacity to fill NVIDIA's massive orders.
• Although NVIDIA works with Samsung as well as TSMC for manufacturing, it's not clear that it could cut out the latter due to higher prices in the near term.
• TSMC will make money off of Apple's new AI with on-device processing, NVIDIA might not.
• In this article I make the case that Taiwan Semiconductor Manufacturing is fundamentally stronger than NVIDIA.

Taiwan Semiconductor Manufacturing Company Limited ( TSM ), also known as 'TSMC,' is NVIDIA Corporation's ( NVDA ) contract manufacturer. With a 60% share of the global semiconductor market and a 90% share in high-end chips, it is a very powerful company. So powerful, in fact, that it may even be in a position to hike the prices it charges to NVIDIA itself. In a recent interview following TSMC's shareholder meeting, Chairman C.C. Wei said that he was considering raising the prices his firm charges NVIDIA. Given the demand for NVDA's new AI chips, and the fact that TSMC's competitors have nowhere near as much capacity as it does, TSMC will likely be able to get the contemplated price hikes accepted....

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