TSMC Born During Taiwan Martial Law Era: Reasons for Its Sustainable Growth [Business & Issues]

TSMC Founded During Taiwan Martial Law Period
Grew Without Political Turbulence Despite Being a State-Owned Enterprise
Market Cap Over 3 Times Larger Than Samsung Electronics

The logo of TSMC headquarters located in Hsinchu Science Park, Taiwan. Photo by AFP and Yonhap News.

On the 3rd, amid concerns about the negative impact on domestic semiconductor companies including Samsung Electronics before and after the declaration of martial law by the Yoon Suk-yeol administration, the growth of TSMC, established during the Kuomintang's martial law period in Taiwan, is drawing attention. Despite being a government-led public enterprise, TSMC has grown rapidly without suffering from political external pressures. This is evaluated as a result of efforts by both ruling and opposition parties in Taiwan's political scene to minimize personnel interference and political pressure on TSMC, which is directly linked to national interests.

TSMC's Market Cap More Than Triple Samsung Electronics... Samsung's Revenue Still Higher

According to CNBC, on the 12th (local time), the American Depositary Receipt (ADR) of TSMC, listed on the New York Stock Exchange, was priced at $191.46, with a market capitalization of $993 billion (approximately 1,421 trillion KRW). On the same day, Samsung Electronics' stock price was 55,900 KRW, with a market capitalization of about 334 trillion KRW. The gap between TSMC's ADR market cap and Samsung Electronics' market cap widened to 4.25 times.

In terms of total revenue last year, TSMC recorded 2,161.7 billion Taiwan dollars (about 95 trillion KRW), while Samsung Electronics posted 258.16 trillion KRW, more than twice that of TSMC. However, since the beginning of the year, Samsung Electronics' stock price has continued to decline, whereas TSMC's has risen steadily, significantly widening the market cap gap. At the start of the year, TSMC's ADR price was $101.53, and as of the 12th, it surged 88.57% compared to the beginning of the year. Meanwhile, Samsung Electronics, which was 79,600 KRW at the start of the year, fell 29.77% during the same period.

Charles Shum, an analyst at Bloomberg Intelligence, analyzed, "While TSMC's competitors, Samsung Electronics and Intel, are struggling to secure customers for their semiconductor production, TSMC's advantage of potential price competitiveness in the future market has been highlighted."

Morris Chang: "Korean Political Turmoil Negatively Affects Samsung"... Contrast with TSMC Growing During Martial Law Period

On the 9th, Morris Chang, the founder of TSMC, attended the publication celebration of his autobiography and held a press conference. Photo by Reuters and Yonhap News.

The recent martial law situation in Korea is also raising concerns that the gap with TSMC will widen further as it negatively impacts Samsung Electronics. According to Taiwan Economic Daily, on the 9th, Morris Chang pointed out at a press conference held to commemorate the publication of his autobiography, "Samsung may be negatively affected in management due to the current political turmoil in Korea." He added, "Samsung has also encountered several technical issues."

The adverse effects of martial law on Samsung Electronics are particularly being compared to the history of TSMC, which was established during Taiwan's martial law period. According to the Taipei Times, TSMC was founded in February 1987 during Taiwan's 38-year-long martial law under the Kuomintang's military dictatorship. At that time, the Kuomintang government declared martial law across Taiwan after losing the Chinese Civil War in 1949 and maintained it until its lifting on July 15, 1987.

TSMC started as a Kuomintang-led public enterprise during the martial law period. In 1985, the Taiwanese government requested the naturalization of Morris Chang, a Chinese Zhejiang Province native and a prominent figure in Silicon Valley who had immigrated to the United States. After becoming the director of the Industrial Technology Research Institute (ITRI) in Taiwan, he established TSMC two years later. Initially, TSMC was launched as a public enterprise based on Taiwanese government funds and was later privatized.

However, unlike other Asian public enterprises, TSMC is evaluated to have grown rapidly without political interference. Both the Kuomintang government that founded TSMC and opposition parties refrained from personnel and management interference as much as possible. TSMC is called 'Hoguk Shinsan (護國神山),' meaning a 'National Protection Sacred Mountain,' symbolizing a company that protects the country within and outside Taiwan's political circles.

With guaranteed independent autonomy, TSMC boldly entered the foundry (contract manufacturing) sector without producing finished products and monopolized semiconductor production orders from U.S. companies that preferred the fabless model centered on design without manufacturing plants, growing into a massive 'super subcontractor.'

Fierce Battle Expected Over 2nm Process... Will TSMC Maintain Its No.1 Position?

Last October, Taiwanese citizens were taking photos at the TSMC Annual Sports Festival held at the Hsinchu Science Park in Taiwan. Photo by Reuters and Yonhap News Agency

Industry insiders are closely watching whether TSMC will completely monopolize the advanced 2-nanometer (nm) semiconductor process market, leaving behind Samsung, which has faltered due to various adversities and Korea's political instability.

According to Taiwan Commercial Times on the 9th, TSMC's 2nm trial production yield has exceeded 60%, and the first mass production is expected between January and April next year. Although TSMC has not officially disclosed the yield, current technology development is progressing smoothly, and if no other adverse factors arise, mass production is expected to start early next year. At the current pace, the 1.6nm (A16) process is also expected to be mass-produced by 2026.

TSMC is expected to significantly increase its capital investment next year to widen the technological gap not only with Samsung Electronics but also with other competitors. According to Taiwan Economic Daily, TSMC plans to establish 10 new factories worldwide next year, with capital investment expected to reach $34 billion to $38 billion (approximately 47.46 trillion to 53 trillion KRW). This amount is up to 18.75% higher than the previously expected $32 billion to $36 billion and is also expected to surpass the record-high capital investment of $36.29 billion in 2022.