It’s become a very familiar story now, but TSMC, the Taiwan Semiconductor Manufacturing Company, as of April 28, 2026, TSMC’s stock price was already up more than 20% for the year. This follows another round of blockbuster earnings announced for the first quarter of 2026. The company reported revenue of TW$1.13 trillion (US$35.9 billion) for the quarter, up 40.6% for the same quarter year-on-year. For an in-depth analysis of TSMC’s market capitalization, earnings, and revenue growth, you can visit the TSMC Stock Summary Page.
The more interesting story, however, is the long-term one. How did TSMC establish this position and maintain it for decades? What do they actually do?
TSMC has a near monopoly on manufacturing the most advanced chips – those with a diameter of less than 7 nanometers. The smaller the chip, the shorter the distance electrons must travel between transistors. For NVIDIA, this is important because smaller chips mean it can fit more computing power into its GPUs used to train large language models. Each of its GPUs will be able to process more data, faster, because it can fit more transistors into each unit.
For Apple, smaller chips are a key element of maintaining vertical integration. This allows their software and hardware to do things that competitors can’t do. Your iPhone 18 will of course run on a 2-nonometer chip, manufactured by TSMC. Apple is said to have acquired 100% of TSMC’s capacity for the first 6-12 months after TSMC develops a new generation of chips, thus staying ahead of its competitors.
How did TSMC get to this position?
By 2023 Berkshire Hathaway During the shareholders’ meeting, Warren Buffett described TSMC as one of the largest and best-managed companies in the world. He added, however, that he didn’t like its location. Interestingly, TSMC founder Morris Chang worked at Texas Instruments for 25 years between 1958 and 1983. He was passed over as CEO and returned to Taiwan to start TSMC. In retrospect, TSMC could have been the Texas Semiconductor Manufacturing Company.
Before TSMC, the semiconductor The industry has operated on the model of the integrated device manufacturer. TSMC’s competitors such as Intel, Texas Instruments and Motorola designed and manufactured their own chips. What makes TSMC different, besides being the best at making chips, is that it only makes the chips. Its customers like Apple and Nvidia design them then TSMC manufactures them. This gives customers the flexibility to design for its unique products. TSMC maintains strict manufacturing walls between the company’s designs. Apple’s designs are ignored when making chips for NVIDIA. This gives TSMC a significant advantage over competitors such as Samsung, which competes with Apple in the smartphone sector. Apple doesn’t have to worry about TSMC using its designs in its smartphones.
What happens in a TSMC factory?
Fabricating a 2-nanometer chip is considered one of humanity’s most complex achievements. The process has thousands of steps and can take 3-4 months from start to finish. The process starts with sand. Common quartz sand is purified to almost 100% pure silicon. The silicon is melted in a large, heavy cylinder called an ingot. This ingot is then sliced and polished to obtain the flattest surface on the planet. The sliced wafer is rotated at high speed while a light-sensitive liquid (photoresist) is deposited on top. Centrifugal force distributes the liquid in an ultra-thin and perfectly uniform layer on the wafer.
This is where the ASML machine comes in. ASML was founded in 1984 as a joint venture between Phillips and ASM international in Eindhoven, the Netherlands. The ASML machine – the High NA Extreme Ultraviolet (EUV) scanner – is considered the most complex machine ever created. Each machine costs nearly $400 million. The machine “makes” EUV light with a wavelength of 13.5 nm. He must make light that does not exist naturally on Earth. This light then passes through a numerical aperture (NA) mirror system. The mirror system is used to focus the light. Normal mirrors are useless here because EUV light passes directly through them.
The light hits the wafer covered with photosensitive resin. The wafer is removed from the ASML machine and immersed in a development solution. This liquid removes the parts of the photoresist that have been affected by light. To make the “print” accurate, the machine checks its position 20,000 per second.
The final product is a silicon wafer – a thin circular disk of silicon with potentially thousands of integrated circuits printed on it.
