A Potential New Rival Wants to Undercut TSMC. Here's What Investors Need to Know.

Throughout the monolithic maturation of artificial quality and the infrastructure that powers it, Taiwan Semiconductor Manufacturing (NYSE:TSM) has been a accordant winner. TSMC, arsenic it's known, is the world's largest spot foundry, producing precocious semiconductors for Nvidia, Advanced Micro Devices, Broadcom, and galore others.

TSMC holds a ascendant 73% marketplace stock successful the planetary foundry market, with second-place Samsung astatine lone 7%. But a Japanese company, Rapidus, is taking purpose astatine TSMC, with plans to mass-produce precocious 2 nm chips portion undercutting TSMC connected price.

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TSMC started producing 2 nm chips this year, and they're reportedly priced astatine $30,000 per wafer. Rapidus, which is reportedly successful talks with much than 60 companies, would reportedly terms its 2 nm process astatine astir $21,000 per wafer, but the institution doesn't program to participate accumulation until 2027.

Can Rapidus truly airs a menace to TSMC's dominance? I don't deliberation so, and here's why.

Image source: The Motley Fool.

TSMC's way grounds can't beryllium touched

It's hard to overstate the interaction that TSMC has had connected the industry. Nvidia CEO Jensen Huang has repeatedly praised the institution -- successful a 2025 quality conference, helium was astir gushing: "They are a world-class foundry and enactment customers of divers needs. You can't overstate the magic that is TSMC," helium said. And during a sojourn to Taiwan, helium called TSMC "one of the top companies successful the past of humanity."

One crushed for TSMC's dominance is its unfastened innovation platform, which the institution uses to collaborate with customers successful their spot designs. TSMC says that done its platform, the institution has been progressive with 85% of planetary start-up semiconductor prototypes. In all, TSMC produced much than 12,600 antithetic products successful 2025 utilizing 305 abstracted process technologies.

TSMC besides excels astatine making chips with much precocious process nodes, meaning that designers tin battalion much of them connected idiosyncratic chips to marque them much powerful. In the archetypal quarter, 25% of TSMC's gross came from gathering 3 nm chips and 36% came from gathering 5 nm chips. That's a large alteration from 2023, erstwhile lone 6% of TSMC's gross came from 3 nm chips and 33% came from 5 nm chips. It hasn't yet reported 2 nm sales, but those volition apt beryllium discussed erstwhile TSMC files its second-quarter net connected July 16.