⚠ A Few Customers, Their Cycles, Their LeverageModerate threat

Extreme customer concentration is a genuine vulnerability beneath the sticky relationships — the 20-F's risk factors say plainly that a significant portion of revenue comes from a few customers¹. With a small number of giants — Apple, Nvidia, and a handful of others — accounting for a large share of leading-edge revenue, TSMC is exposed to each one's fortunes and decisions. A downturn in the smartphone market hits the Apple business; a pause or digestion in AI spending would hit the Nvidia and hyperscaler business hard; a major customer's product misstep or strategic shift ripples straight through to TSMC, with no broad base of smaller customers to cushion the blow. The concentration amplifies the industry's cyclicality at the level of individual customer fortunes.

The concentration also hands those few customers real leverage. A buyer representing a large slice of TSMC's most valuable revenue can press on price and terms even as it depends on TSMC's technology, and the largest customers co-invest, co-plan, and negotiate from a position of genuine importance. Nvidia's explosive rise has made the AI-chip designers collectively enormous customers whose demands TSMC must accommodate. The dependence is mutual, and mostly it protects TSMC — the giants cannot leave — but it concentrates TSMC's destiny in the hands of a few powerful firms whose cycles it rides and whose bargaining it must absorb. A monopoly-like position on the supply side is paired with a concentrated, powerful set of buyers on the demand side, and that concentration is the sharpest edge of an otherwise formidable customer moat.