TSMC's U.S. Revenue Share Hits 75%, Amplifying Growth and Concentration Risks

What happened

A new article reports that three-fourths of Taiwan Semiconductor's sales now come from America, reinforcing its expanding U.S. presence through investments and market ties. This updates the DeepValue report's note of ~68% revenue concentration in North America during 2022-2023, indicating a further rise in dependency on the U.S. market. The report highlights TSM's strategic overseas expansions, including fabs in Arizona, Japan, and Germany, aimed at diversifying geopolitical risks but facing higher costs and execution challenges. However, this increased reliance exacerbates key risks such as customer concentration, export controls, and potential margin pressure from overseas operations. Overall, while the growth underscores TSM's pivotal role in AI and tech supply chains, it intensifies vulnerabilities that could narrow the investment margin of safety.

Implication

The rise in U.S. sales bolsters TSM's near-term revenue and earnings, driven by robust AI and smartphone demand from key American customers. Yet, this concentration deepens exposure to demand volatility and policy shifts, such as U.S.-China trade tensions, which could disrupt operations. Overseas fab expansions, while mitigating some geopolitical risks, introduce operational inefficiencies and cost overruns that may dilute long-term returns and group margins. After a 46% stock price gain, valuation multiples like ~25.5x P/E may not fully account for these heightened risks, especially given the capital-intensive nature of global capex. Consequently, investors should maintain cautious position sizing, prioritizing monitoring of customer diversification and overseas project execution over aggressive bets on sustained high growth.

Thesis delta

The updated U.S. revenue share of 75% confirms and slightly amplifies the concentration risk already outlined in the DeepValue report, but it does not fundamentally alter the core thesis. It reinforces the need for vigilant oversight of geopolitical and operational risks, particularly as overseas fabs ramp up. Therefore, the stance remains 'POTENTIAL BUY' with an emphasis on conservative sizing due to narrowed safety margins.