The new addition, Taiwan Semiconductor Manufacturing Company (NYSE:TSM), controls over 50% of the semiconductor foundry market and commands an even greater share in technologies that require advanced process nodes. Foundry is a business with significant barriers to entry due to significant capital requirements, in-depth technological expertise and a customer-centric business model. Taiwan Semiconductor is one of only a few companies that possesses the attributes necessary to lead the industry for the long term. In addition, we think the company’s growth should outpace the overall semiconductor industry due to its greater exposure to quickly expanding end markets, a rapidly growing client base, continued outsourcing activity and impressive market share gains. Furthermore, for the past five years, Taiwan Semiconductor has returned 80% of its excess cash to shareholders through dividend payments. Finally, the company has recently boosted its free cash flow, which management will likely use to reward shareholders further.
From David Herro (Trades, Portfolio)'s Oakmark Global Fund fourth-quarter 2018 shareholder letter.
