[Taiwan Chip News] TSMC Goes All-In on R&D... "Increasing Investment Even If Sales and Operating Profit Decline"

Last Year, Taiwanese Manufacturing Listed Companies Accounted for 1/4 of R&D Investment
Samsung Also Invests Annually... Foundry R&D War Intensifies

Taiwan's TSMC, the world's No. 1 foundry (semiconductor contract manufacturing) company, spent a quarter of the total research and development (R&D) expenses of all listed manufacturing companies on the Taiwan stock market last year. Samsung Electronics, TSMC's rival, has also continued to make annual R&D investments at record levels, intensifying the 'R&D war.'

[Image source=Reuters Yonhap News]

According to Taiwan's Ministry of Economic Affairs Statistics Office on the 13th, R&D expenditure by listed manufacturing companies last year increased by 2.9% from the previous year to 692.7 billion New Taiwan dollars (approximately 29.22 trillion Korean won), marking an all-time high. This figure was compiled based on individual financial reports from 1,101 manufacturing companies listed on the Taiwan Stock Exchange.

By company, TSMC ranked first with 178.7 billion New Taiwan dollars (about 7.54 trillion Korean won), an 11.1% increase in R&D investment compared to the previous year. It accounted for 25.8% of the total R&D expenses of all listed manufacturing companies last year. MediaTek, the world's largest smartphone chipset company, ranked second with 80.6 billion New Taiwan dollars (about 3.4 trillion Korean won), holding an 11% share of the market. Taiwan fabless semiconductor design company Realtek ranked third with 21 billion New Taiwan dollars (about 900 billion Korean won), accounting for 3% of the total.

Among manufacturing sectors, electronic components companies had a large share of R&D investment. R&D expenditure by electronic components companies was 450.7 billion New Taiwan dollars (about 19 trillion Korean won), accounting for 65.1% of the total manufacturing sector. The second-largest sector, computers, electronic products, and optical products, spent 158 billion New Taiwan dollars (about 6.66 trillion Korean won), representing 22.8%. Together, these two sectors accounted for 87.9% of the total.

Taiwanese companies increased R&D spending despite declines in sales, operating profit, and fixed asset investments (land, factories, machinery, etc.). Last year, net sales of listed manufacturing companies in Taiwan were 1,887.7 billion New Taiwan dollars (about 796.23 trillion Korean won), down 10.7% from the previous year. Operating profit was approximately 140 billion New Taiwan dollars (about 59 trillion Korean won), a 26.4% decrease year-on-year. The operating profit margin (operating profit divided by sales) fell by 1.7 percentage points to 7.9%. Last year, global demand for electronic products weakened, and companies continuously adjusted inventories, leading to decreased performance.

As performance worsened, fixed asset investment by listed companies dropped 20.9% year-on-year to 119.91 billion New Taiwan dollars (about 50.58 trillion Korean won). TSMC (63.5 billion New Taiwan dollars, about 26.8 trillion Korean won) and MediaTek (7.93 billion New Taiwan dollars, about 3.34 trillion Korean won) ranked first and second, respectively. Their shares of total stock market fixed asset investment were 53% for TSMC and 4% for MediaTek.

The reason Taiwanese semiconductor companies are increasing R&D investment regardless of performance is to win the competition in advanced process technology against overseas rivals such as Samsung Electronics and Intel. On the 24th of last month (local time), Y.J. Mii, TSMC's co-Chief Operating Officer (COO), announced plans to manufacture semiconductors using a 1.6 nm (nanometer; 1 nm is one-billionth of a meter) process in the second half of 2026, intensifying the process and customer acquisition competition among the three foundry companies (TSMC, Samsung Electronics, Intel). All three companies have publicly declared plans to establish mass production systems moving from 2 nm in 2025 to 1.4 nm in 2027.

According to Taiwan market research firm TrendForce, the foundry market share is TSMC at 61.2% (1st place) and Samsung Electronics at 11.3% (2nd place). The gap between the two companies widened by 4.4 percentage points from 45.5 percentage points in the third quarter of last year to 49.9 percentage points. Samsung Electronics spent 28.3397 trillion Korean won on R&D and 53.1139 trillion Korean won on facility investment last year.

Taiwan Economic Daily News = Reporter Jang Luigi / Translation = Asia Economy

※ This column is published through a strategic partnership between Asia Economy and Taiwan Economic Daily News.