ASML and Taiwan Semiconductor Manufacturing Company (TSMC) are not competing chipmakers. ASML sells the equipment, software and services that semiconductor manufacturers use to make chips. TSMC is a dedicated foundry: it manufactures chips from designs supplied by other companies. Both benefit from semiconductor growth, but they are exposed to different spending decisions, operating risks and stock-market factors.
The comparison below uses ASML’s 2025 annual report, TSMC’s 2025 Form 20-F and both companies’ second-quarter 2026 releases, with information frozen on October 13, 2026. Reported currencies, accounting bases and periods are kept separate, so the figures are informative rather than a simplistic ranking.
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ASML and TSMC at a glance
| Question | ASML | TSMC |
|---|---|---|
| Where it sits in the value chain | Semiconductor-manufacturing equipment, software and services supplier | Contract semiconductor manufacturer, or foundry |
| What customers buy | Manufacturing systems, installed-base support, upgrades and field options | Wafer fabrication plus packaging, testing, mask-making and design-related services |
| Main revenue engine | System sales and service and field-option sales | Wafer fabrication; approximately 86% of 2025 net revenue came from wafer fabrication |
| Primary customer decision affecting results | When and how much chipmakers invest in production equipment | How many wafers customers order, the capacity used, pricing and process technology mix |
| 2025 reporting currency | Euros; cited annual figures use US GAAP | New Taiwan dollars; US-dollar figures are convenience translations |
| Stock-market access noted in the filings | The supplied company disclosures do not establish a current instrument comparison | Taiwan Stock Exchange ordinary shares and New York Stock Exchange American Depositary Shares |
What ASML actually does
An equipment and technology supplier, not a chipmaker
ASML helps chip manufacturers create microchips by supplying lithography and related semiconductor-manufacturing technology. Its systems are capital equipment: customers install them in fabrication plants and use them as part of a much larger production process. ASML does not take a customer’s chip design, manufacture finished wafers and sell those chips under its own foundry operation.
That distinction matters when interpreting its results. A chipmaker can have strong end-market demand while delaying a factory expansion, or it can place a large equipment order before the resulting wafer output generates revenue. ASML therefore sees the effect of customers’ capital-spending schedules, technology transitions and factory timing.
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Two substantial revenue streams
ASML’s 2025 reporting shows why looking only at new-system orders is incomplete. It recorded €24.5 billion in net system sales and €8.2 billion in net service and field-option sales, for €32.7 billion of total net sales. Service and field-option activity supports and upgrades systems already installed at customer sites. The installed base can therefore produce revenue even when a customer’s appetite for entirely new systems changes.
Equipment demand is still cyclical. Customers decide whether to add capacity, move to a new process technology or postpone a project. Mix also matters: the value and timing of systems delivered in one period can differ considerably from another. Service revenue creates a second channel, but it does not remove exposure to the semiconductor investment cycle.
What TSMC actually does
A dedicated foundry for customer designs
TSMC manufactures semiconductors designed by customers. This business model is commonly called a dedicated foundry because the company focuses on producing chips for many customers rather than selling a proprietary branded chip portfolio. Its reported activities also include packaging, testing, computer-aided design and mask manufacturing.
Wafer fabrication dominates the economics: TSMC’s 2025 filing says it represented approximately 86% of net revenue. Customers’ designs, process choices and production orders determine what TSMC manufactures, while TSMC supplies the factories, process technology, labor and operating infrastructure needed to turn designs into wafers.
Volume, utilization and technology mix
TSMC’s 2025 net revenue grew 31.6% year over year. The company attributed the increase mainly to a higher average selling price associated with a greater share of advanced-technology revenue and to higher wafer shipments. It shipped approximately 15 million 12-inch-equivalent wafers in 2025, compared with approximately 13 million in 2024.
For TSMC, the key operating questions are different from ASML’s. How much factory capacity is running? What prices apply to the wafers being produced? Which process technologies are in the mix? Are customers ordering enough output to absorb capacity? Foreign-exchange movements can also change reported revenue and margins.
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How the two companies connect in the semiconductor chain
A simplified chain looks like this: a chip company creates a design; a foundry such as TSMC manufactures wafers from that design; and equipment suppliers such as ASML provide critical manufacturing systems used in the factory. The same semiconductor demand can benefit both companies, but not at the same moment or through the same transaction.
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2025 financial comparison
| Metric | ASML (2025) | TSMC (2025) |
|---|---|---|
| Revenue measure | Net sales: €32.7 billion | Net revenue: NT$3,809.054 billion; the filing also provides a US$121.423 billion convenience translation |
| Gross margin | 52.8% | 59.9% |
| Net income measure | €9.6 billion | Net income attributable to parent shareholders: NT$1,697.604 billion |
| Earnings per share | Basic EPS: €24.73 | Not included in the cited full-year figures |
| Accounting and currency note | Cited annual highlights are US GAAP figures reported in euros | Accounts are reported in New Taiwan dollars; the US-dollar translation is for reader convenience and does not guarantee a conversion rate |
These numbers show each company’s reported scale and profitability, but they do not establish that one business is operationally superior. ASML sells high-value equipment and services; TSMC runs wafer-fabrication operations and related services. Their revenue recognition, capital requirements, customer contracts, currencies and accounting presentation differ. A direct comparison of the nominal revenue or gross-margin percentages without that context can mislead.
What the latest common quarter showed
The latest common interim period in the supplied disclosures is the second quarter of 2026. ASML released its results on July 15, 2026. TSMC reported the quarter ended June 30, 2026, in a release issued July 16.
| Q2 2026 metric | ASML | TSMC |
|---|---|---|
| Revenue | Net sales of €9.326 billion | Consolidated revenue of NT$1,270.38 billion |
| Gross margin | 54.0% | 67.7% |
| Net income | €2.918 billion | NT$706.56 billion |
| Other disclosed measure | Installed-base management sales of €2.762 billion | Operating margin 60.3%; net profit margin 55.6%; diluted EPS NT$27.25, or US$4.31 per ADR unit |
| Advanced-technology mix | Not stated in the cited quarterly figures | 7-nanometer and more advanced technologies represented 77% of wafer revenue |
The quarter illustrates why margin rankings need business-model context. A foundry’s gross margin reflects factory utilization, wafer pricing, process mix and manufacturing costs. An equipment supplier’s margin reflects system mix, production costs, service activity and delivery timing. The currencies are also different, so the revenue figures cannot be compared by simply placing the numbers side by side.
Guidance: similar date, different periods
ASML’s outlook
In its July 15, 2026 release, ASML raised its full-year 2026 outlook to €43–45 billion of revenue and a 54–56% gross margin. It expected third-quarter 2026 revenue of €11–12 billion and a 55–57% gross margin. The €43–45 billion range is a full-year forecast; the €11–12 billion range is a quarterly forecast.
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TSMC’s outlook
TSMC’s Q2 2026 results page guided third-quarter 2026 revenue to US$44.6–45.8 billion, using an assumed USD/NTD exchange rate of 32. It forecast a 65–67% gross margin and a 56–58% operating margin for that quarter. This is not directly comparable with ASML’s full-year euro range, and even the quarterly figures describe different businesses.
ASML’s Q3 2026 results announcement was scheduled for October 14, 2026. Because the information here is dated October 13, no ASML Q3 actual result is included.
What drives each company’s earnings
ASML: investment timing, systems and the installed base
- Customer capital expenditure: New fabs and technology upgrades can create large system orders, while delays can push deliveries into later periods.
- System mix and shipment timing: The type and number of systems delivered affect revenue and gross margin in a particular quarter or year.
- Services and upgrades: Maintenance, field options and installed-base management provide a recurring activity stream tied to systems already operating at customer sites.
- Semiconductor-cycle breadth: Demand can be strong in one chip segment and weak in another, producing mixed investment decisions.
ASML CFO Roger Dassen described the 2025 environment as “Results in line with guidance, as AI investment continues to gather momentum.” That is management’s characterization of the period, not a guarantee that future customer spending will follow the same path.
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- Wafer shipments: More shipped wafers generally increase revenue when pricing and mix are stable.
- Utilization: High utilization spreads factory costs across more output; weak utilization can pressure margins.
- Average selling price and process mix: A larger share of advanced technologies helped drive TSMC’s 2025 revenue growth.
- Capacity and technology: New process nodes and the capacity allocated to them influence both investment needs and pricing.
- Foreign exchange: Revenue and margins can move when exchange rates change, especially because the company reports in New Taiwan dollars while many commercial transactions reference other currencies.
TSMC CFO Wendell Huang said in the Q2 2026 earnings release, “Our business in the second quarter was supported by strong demand for our leading-edge process technologies.” This is a management statement about that quarter’s conditions.
Risk differences investors should examine
ASML’s demand and order-timing risk
ASML’s annual-report discussion described uncertainty in customers’ investment decisions and mixed demand across semiconductor segments during 2025, while noting continuing strength in AI-related demand. The practical risk is timing: a customer can need ASML’s technology over the long term but defer a purchase, change a factory schedule or alter the process mix. Service revenue offers support from the installed base, but it does not make new-system demand immune to cycles.
TSMC’s concentration and manufacturing risk
TSMC’s 2025 filing identifies demand, supply, pricing, capacity, technology and exchange rates as factors affecting revenue and margins. It also disclosed that approximately 78% of 2025 net revenue came from its ten largest customers and approximately 19% came from its largest customer. Concentration means a change in a major customer’s product cycle, inventory or sourcing decision can have a material effect.
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TSMC also carries the operating complexity of large-scale wafer fabrication. Capacity must be planned and utilized, advanced processes must ramp successfully, and pricing must cover substantial fixed costs. These are different exposures from ASML’s equipment-order and service cycle.
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How to think about the stocks
“Which stock is better?” is not answered by operating figures alone
The supplied company disclosures do not establish a current valuation winner. No current share price, market capitalization, price-to-earnings multiple, enterprise-value measure, dividend yield or analyst consensus is included. Without dated market data and a defined valuation method, saying that ASML or TSMC is the “better buy” would be speculation.
Business quality and expected stock returns are separate questions. A strong company can be an expensive stock, while a cyclical company can look inexpensive just before earnings weaken. Investors also need to specify the instrument: TSMC’s Taiwan-listed ordinary shares and its New York-listed ADSs represent related exposure but trade in different markets and currencies. The reviewed filing does not establish current depositary or brokerage fees.
A practical comparison checklist
- Choose the instrument and date. Identify the exchange, share class or ADS, trading currency and the exact price date.
- Normalize the financials. Convert euros, New Taiwan dollars and any US-dollar figures using a stated exchange rate and date. Keep US GAAP and the relevant TSMC reporting basis identified.
- Match the periods. Compare full-year figures with full-year figures and quarterly figures with quarterly figures. Do not compare ASML’s 2026 full-year guidance with TSMC’s 2026 third-quarter guidance.
- Select a valuation measure. Define whether you are using forward earnings, trailing earnings, free-cash-flow yield, enterprise value or another method, and use the same definition for both companies where possible.
- Test the operating thesis. For ASML, examine system bookings, deliveries, service growth and customers’ capital-spending plans. For TSMC, examine wafer shipments, utilization, pricing, advanced-node mix and customer concentration.
- Stress-test the risks. Consider delayed equipment orders for ASML and weaker demand, lower utilization, pricing pressure, technology-ramp issues or foreign-exchange moves for TSMC.
- Separate facts from forecasts. Label company guidance and management commentary as forward-looking; do not treat either as a promise.
Which business may fit which investment thesis?
If you want equipment-cycle exposure
ASML is the more direct fit for a thesis centered on semiconductor manufacturers’ equipment investment, process transitions and the long-term value of an installed base. The trade-off is sensitivity to the timing of customer capital expenditure and system deliveries.
If you want wafer-production exposure
TSMC is the more direct fit for a thesis centered on chips being manufactured at scale, wafer demand, utilization and advanced-process mix. The trade-off is exposure to factory economics, customer concentration and the operational risks of running fabs.
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If you want a valuation answer
Neither company can be selected responsibly from the operating data alone. Add contemporaneous prices, share counts, exchange rates, valuation multiples and a time horizon before drawing a stock conclusion. The same business can look attractive or unattractive depending on the price paid.
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Common misconceptions
“ASML makes chips.”
It does not. ASML supplies manufacturing systems, software and services to companies that make chips.
“TSMC sells its own branded chip designs.”
TSMC’s core role is manufacturing semiconductors from customer designs. Its reported business also includes packaging, testing, mask-making and design-related services.
“The higher reported gross margin automatically wins.”
TSMC’s 67.7% Q2 2026 gross margin and 59.9% 2025 gross margin cannot be ranked against ASML’s 54.0% and 52.8% without accounting for foundry versus equipment economics, currency and reporting basis.
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“A rising AI market affects both companies identically.”
AI demand can encourage chipmakers to buy equipment, benefiting ASML’s order pipeline, and can increase demand for advanced-node wafer production, benefiting TSMC. The timing, contract structure and financial impact can differ materially.
Bottom line for readers
ASML is an equipment-and-services supplier whose results hinge on semiconductor manufacturers’ investment timing and installed-base activity. TSMC is a contract foundry whose results hinge more directly on wafer demand, utilization, pricing, process mix and currency. Their 2025 and Q2 2026 figures show strong businesses operating at different points in the same ecosystem, not interchangeable companies.
Use the reported numbers to understand the businesses first. To decide which stock offers better value, you still need dated market prices, instrument details and a consistent valuation framework.
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