S&P raises TSMC outlook to positive on market dominance

S&P Raises TSMC Outlook to Positive on Market Leadership

S&P Global Ratings revised its outlook on Taiwan Semiconductor Manufacturing Co. to positive from stable on Monday, affirming the chipmaker’s AA- long-term issuer credit rating and citing its commanding position in the global foundry sector.investing

Widening Dominance

The ratings agency pointed to TSMC’s growing distance from competitors as a central factor in its decision. TSMC accounted for about 72% of total revenue among the 10 leading global foundry service providers in 2025, with a revenue scale roughly 8.7 times larger than its closest peer — up from about 54.6% market share and a 2.9-times revenue advantage in 2021. S&P also affirmed its AA- issue rating on notes issued by TSMC Global Ltd. and TSMC Arizona Corp.investing

The agency expects TSMC’s EBITDA margin to rise to 69%-70% in 2026, supported by improving capacity utilization and stronger pricing power. Intense demand for advanced chips used in AI applications and cloud infrastructure currently exceeds TSMC’s manufacturing capacity, providing order visibility and pricing leverage through 2027.spglobal

Cash Flow and Capital Spending

S&P expects TSMC to generate free operating cash flow of NT$1.6 trillion in 2026 and NT$1.9 trillion in 2027, even as the company raised its capital expenditure budget to $52 billion–$56 billion in 2026 from about $41 billion in 2025. Cash dividends totaled NT$467 billion in 2025 and are expected to increase by about 30% annually.investing

Revenue from AI processors — including GPUs, AI accelerators, and CPUs — accounted for 22% to 25% of TSMC’s total revenue in 2025, while high-performance computing represented 58% of sales, up from 43% in 2023.investing

Geographic Diversification

TSMC’s expansion beyond Taiwan has progressed, with its first Arizona fabrication unit now ramping production at comparable yield rates. The company is also building facilities in Japan and Europe and plans to locate about 30% of its 2-nanometer and more advanced capacity in Arizona once those projects are complete. At the end of 2025, roughly 90% of TSMC’s production capacity remained in Taiwan.investing

TSMC CEO C.C. Wei said earlier this month that customers remain positive on the AI demand outlook and that the company is “working very hard” to meet chip demand, according to Reuters.reuters