Silicon Shield: What Taiwan’s TSMC teaches us about investing in Asia

On their first sight of Taiwan, Portuguese explorers named it Ilha Formosa (Beautiful Island). It’s a liberal democracy. And it’s home to TSMC - a company so important to the global economy it affects the grand strategy of the two superpowers. 

The company makes around 90% of the most advanced semiconductors used in everything from smartphones to AI. Those chips are so integral to the global economy the USA’s National Security Strategy states, “There is, rightly, much focus on Taiwan, partly because of Taiwan’s dominance of semiconductor production...”¹ The Taiwanese nicknamed TSMC the ‘Silicon Shield’ – because the US might be willing to go to war with China rather than lose access to TSMC’s capabilities.  
 
Birth of a giant – the TSMC origin story

TSMC began its ascent after Morris Chang – with two mechanical engineering degrees from MIT and an electrical engineering PhD from Stanford – was passed over for the CEO role at Texas Instruments. Chang then led Taiwan’s Industrial Technology Research Institute, a government-sponsored non-profit promoting tech development, before founding TSMC in 1987. 

TSMC’s success springs both from a tech shift and from business model brilliance. Intel dominated the early years of the computer revolution. Their ‘generalised’ CPU chips were capable of rapid, constant improvement and, embedded in Windows devices, built the ‘Wintel’ ecosystem. Throughout this period TSMC toiled away in the background, slowly building out their own ecosystem and manufacturing prowess.

Over time, Intel missed some critical new use cases for chip technology, applications where their dominant but one-size-fits-most CPUs were not well suited. Tech companies started looking for customised chips, like the low-power chips required by early mobile devices, and the specialised accelerator chips used in networking and high-performance computers. 

TSMC met the demand for these new chips and cemented themselves as the world’s preeminent pure-play chip foundry business. It would not design, manufacture or market semiconductor products under its own name and would never compete with its customers. Today it’s the chip supplier to Nvidia, Apple, Broadcom and others, famous for its quality, on-time delivery and secrecy around customers’ designs. 

“TSMC had been the pipsqueak whilst Intel was the 800-pound gorilla,” says Cameron Robertson, Portfolio Manager, Platinum Asia Fund. “But when companies like Nvidia came calling, designing their own chips but needing unbelievably high-quality manufacturing, TSMC as we now know it was made.”

Today TSMC benefits from Rock’s Law. Arthur Rock – a Silicon Valley venture capitalist – argued that the cost of building a semiconductor chip plant (a ‘fab’) doubles every four years, making it incredibly challenging to compete in that space. 

TSMC continues to thrive, thanks to its scale, ability to invest in the latest tech and a business model that means it refines its manufacturing processes in lock step with its customers.

TSMC Lesson One – Asia is a tech-rich market ²

TSMC exemplifies one of the great Asian themes: the region offers access to many diverse fast-growing tech businesses. Asia is now a genuine alternative, or complement, to the US market and the concentration risk of the Magnificent Seven. 

At Platinum we’ve been long-term investors in Asian tech. Like our TSMC holding, we’ve owned Korean chipmakers SK hynix and Samsung for many years, because they’re quality companies operating in a rational market. They’ve surfed the decades-long digitisation trend whether through software development, the switch to mobile, the cloud or AI. 

“We've always felt a well-functioning oligopoly in a growing demand environment should make you pretty good money. For companies like Samsung and SK hynix, AI is just the latest iteration of that,” says Cameron Robertson. 

Over the past ten years SK hynix is up an average of 35% a year. Samsung – a more diverse business – averages 16% p.a. over that time.³

When we look to China we see similar opportunities. We hold Alibaba, a world-class e-commerce, payments, entertainment and cloud computing business. It’s also a major AI player. It’s Qwen app – “the best personal AI assistant” – offers access to chat, productivity tools, mapping, shopping, image generation and coding. And it’s free.  Alibaba is also developing high-end chips to compete with Nvidia in the Chinese market. 

These are just a few of the high-quality tech stocks we’re finding across Asia – especially in Taiwan, Korea and China. They are excellent diversifiers for Australian investors whose domestic portfolios bulge with banks and miners. 

TSMC Lesson Two – Trade trumps tariffs

The other great factor driving Asian growth and adding to its attraction as an investment destination is deep integration into the global economy. Trading success is what enabled Asia’s rise in the 60s and 70s. As the world’s reliance on TSMC chips exemplifies, Asia is now even more embedded into global supply chains. 

That’s why the Trump administration’s tariff threats moved markets sharply in mid-2025. Yet as legendary economist Dr Nouriel Roubini wrote recently, President’s Trump tariff bark has been worse than his bite. The surge in tech investment has outweighed tariff effects on the Asian and global economies.⁴ 

Conversely, the easing of tariff fears has energised parts of Asia’s economy. Korea’s Hyundai and Kia both jumped sharply in early November when the US trimmed car tariffs from 25% to 15%. 

The US also agreed to cut tariffs on timber, pharmaceuticals, aircraft parts and more. Quid pro quo for this tariff cut was a Korean promise to invest $350 billion in the US economy, with $200 billion going through companies like Korea’s Hanwha Ocean. That company is helping rebuild US shipbuilding in places like the Hanwha Philly Shipyard in Pennsylvania. 

These are just a few examples of how Asian companies are not just surfing the global AI boom. They’re benefiting from US attempts to reindustrialise, reshore and friend-shore manufacturing industries like defence, shipbuilding and chip-making and to catch-up in nuclear power generation, power grids and robotics. 

This trend has boosted companies like TSMC – which is building a new fab in Arizona – but also Korea’s Hanwha, Japan’s robotics giant FANUC and many more. 

When we look across Asia we see ever-deepening trade ties. Again, TSMC is the exemplar – it has fabs in Taiwan and mainland China and is building out its footprint in Japan. More than half of Asia’s trade is now within the region, supporting growth, jobs and capital formation and underpinning growing prosperity. 

The missing Chinese consumer 

The trade story does not go all one way (outwards). Like many Asia observers we’ve long had concerns about China’s inability – or refusal - to move on from its export-driven economic model. 

Export-driven growth was key to China’s emergence from poverty. Many now argue that if China were to pivot towards a more consumption-oriented economy, it could deliver more economic growth, not to mention better lifestyles for Chinese consumers. 

Such a switch might also ease global trade tensions. US/China spats about market access, tariffs, rare earths and intellectual property are the loudest stories. But countries like Germany have also suffered from China’s aggressive export strategy. They wanted to export Benzes and Beemers to China, but woke up to find BYDs flooding dealer floors in their core European markets. 

Our focus is always on individual stocks and while these trade tensions are always in our thinking about Chinese shares, letting trade policy take a back seat has enabled excellent portfolio results from companies like Alibaba, Kuaishou, BilliBilli and Tencent. These all combine technological excellence with massive markets in the domestic, not export, sector of the Chinese economy. They’re less exposed to tariffs, quotas and other trade barriers.

TSMC Lesson Three – Geopolitics and the Asian investor

No discussion around TSMC, Taiwan’s economic miracle or Asian investment can ignore geopolitics. Bonnie Glaser, Asia program director, at the German Marshall Fund said after the 2024 Taiwan election: “Taiwan is not just a territorial dispute; it is the most dangerous flashpoint in the world today because it sits at the intersection of Chinese nationalism, U.S. credibility, and regional security in East Asia.” ⁵

Beijing seeks unification with Taiwan. The West wants the status quo – including access to the island’s technology. The tension has existed since 1949 and is further complicated by the interdependence of the cross-strait economies. 

Mainland China is Taiwan’s second largest export market and its largest source of imports.⁶ One fifth of global trade navigates those waters.⁷ Simple economics suggests an attack on Taiwan hurts everybody. 

The Taiwan Strait tension offers another lesson about investing in Asia. The geopolitics are often volatile. Over the past year we’ve seen a mini-coup in Korea, political turmoil in Thailand and riots in Indonesia. Yet the Western world has its flashpoints too, including the contested space between Kyiv and Moscow. 

Despite these threats, Asian markets were up 26% in 2025 and the MSCI AC World Index up 18%.⁸ As investors we need to understand global geopolitics but not cower before it. Active management can be especially valuable in regions like Asia, giving investment managers the flexibility to respond to geopolitical shifts and the changing governance models across the region. 

TSMC Lesson Four – Asia offers growth at attractive prices.

When we look at Asia today we see many companies that are leaders in the industries of the future – like TSMC. We see a region both deeply interconnected and vital to the most valuable supply chains in the world economy. We see a growing middle-class that could number 3.5 billion people by 2030 creating a self-sustaining consumer economy worth $3.5 trillion in spending. 

Perhaps most importantly, there are high quality Asian businesses available at valuations that leave a margin for error if things go wrong and upside if they go right.  While region-wide indices don’t tell the whole story, at the end of 2025 the Price to Earnings Ratio for the US S&P500 was 28x.⁹ The MSCI AC Asia P/E was just 18x. ¹⁰

The Platinum Asia Fund (C Class) has averaged a net return of 12% p.a. since inception in 2003.
 

• 24% in the past year.
• 14% p.a. over three years.
• 9% p.a. over ten years. ¹¹ 

1. National Security Strategy of the United States of America, November 2025
2. For more on how tech shapes the investment case for Asian shares, see Cameron’s presentation to Platinum investors here. 
3. All returns to December 31, 2025, in local currency. Source: Factset.
4. See https://fortune.com/2025/11/25/dr-doom-nouriel-roubini-says-no-ai-bubble-growth-recession-american-exceptionalism 
5. A Brief Conversation with Bonnie Glaser on U.S.-Taiwan-China Relations in Lai Ching-te’s Presidency,  Jackson School Journal of International Studies, January 2024
6. Source: Taiwan’s International Trade Administration
7. See www.csis.org/analysis/disruptions-trade-taiwan-strait-would-severely-impact-chinas-economy 
8. Source: Factset
9. Source S&P Dow Jones, 31 December 2025 
10. Source MSCI, 31 December 2025
11. All numbers at 31 December 2025, Source Platinum