The Trailing Edge TSMC Declines to Fight ForNarrow moat
TSMC (TSM) — moat facet
TSMC's 73% is an average of a market it owns above 90% and one it barely contests — the pricing power lives only at the top.
Below the leading edge sits a large, unglamorous market for mature-node chips — power management, microcontrollers, display drivers, automotive parts — and TSMC's position there is respectable rather than dominant. UMC holds about 3.9% of the foundry market, GlobalFoundries 3.3% and HuaHong 2.5%1, and they compete with each other and with TSMC's older fabs on price and availability rather than on capability.
TSMC's response has been to not particularly care. Its capital goes to the leading edge, where each node costs more than the last and only three customers can afford the newest one, because that is where the margins are: wafer fabrication produced about 86% of net revenue in 20252, and the advanced nodes produce most of the profit within it. Mature-node capacity is kept running and depreciated, not expanded aggressively.
This is worth stating because it bounds the moat honestly. TSMC's ~73% foundry share is an average across markets where it holds over 90% and markets where it holds much less. The pricing power that justifies the multiple exists at the top of the range, not across it.
The thing to watch here is mature-node overcapacity, particularly Chinese capacity built without regard to returns. It cannot touch TSMC's leading-edge business, but it can compress the trailing-edge revenue that currently absorbs the fixed costs of fully-depreciated fabs — a quiet drag rather than a dramatic loss.
The division of the market is long-settled and neither side is pushing. TSMC directs its capital to the leading edge; UMC, GlobalFoundries and HuaHong compete on price and availability at mature nodes. The one thing that could change it is Chinese mature-node overcapacity built without regard to returns, which would compress trailing-edge pricing without touching the business that matters.
The rest is packaging and testing, mask making, design and royalties. TSMC's ~73% foundry share averages a leading edge it holds above 90% with mature nodes where UMC, GlobalFoundries and HuaHong compete on price. Watch mature-node overcapacity, especially Chinese capacity built without regard to returns.
Source: TSMC Form 20-F, FY2025 ↗- Third-party estimateUMC holds about 3.9% of the foundry market, GlobalFoundries 3.3% and HuaHong 2.5%.Third-party foundry market-share data, Q1 2026 — TSMC captured about 73% of the pure-foundry market; Samsung second at 6.5%, followed by SMIC 5.1%, UMC 3.9%, GlobalFoundries 3.3% and HuaHong 2.5%; Intel does not appear in the top ten foundry rankings; Intel 18A entered high-volume manufacturing in October 2025 with yields estimated at 65-75%, still below TSMC's mature 3nm process, and Intel Foundry reported a $2.4 billion operating loss in Q1 2026; SMIC posted a record quarter at 93.7% utilisation; Samsung is prioritising yield on its SF2 2nm process, with Qualcomm and Tesla among those planning to use it — Q1 2026 · publ. 2026 · source ↗
- ReportedWafer fabrication accounted for approximately 86% of TSMC's net revenue in 2025.TSMC Form 20-F, FY2025 — customer concentration: ten largest customers accounted for approximately 70%, 76% and 78% of net revenue in 2023, 2024 and 2025; the largest customer accounted for 25%, 22% and 19% and the second largest for 11%, 12% and 17% in those years; ten largest customers accounted for 93% and 84% of accounts receivable at December 31 2024 and 2025; the company notes its customer profile and the nature of its customers' business have changed dramatically with the structural shift to HPC and smartphone applications, that only a limited number of customers are successfully exploiting this business model, and that increasing consolidation of customers may further increase revenue concentration; wafer fabrication accounted for approximately 86% of net revenue in 2025 — FY2025 (ended December 31, 2025) · publ. April 16, 2026 · source ↗