Taiwan Semiconductor Manufacturing Company (TSMC) is the largest contract chipmaker in the world, heavily relying on ASML's photolithography systems to produce chips for major clients like Apple, AMD, Nvidia, and Qualcomm.

ASML stands as the world's largest producer of photolithography systems and is the sole manufacturer of extreme ultraviolet (EUV) lithography systems, which are crucial for creating advanced semiconductor chips.

The absence of ASML would pose significant challenges for major foundries such as TSMC, Samsung, and Intel, hindering their ability to produce advanced chips and thereby affecting global semiconductor production.

TSMC generates over half of its revenue from advanced 5nm and 3nm nodes and intends to continue utilizing existing low-NA EUV systems for future nodes, which may impact ASML's sales.

Despite facing a decline, TSMC has raised its full-year revenue outlook for 2023 to nearly 30%, fueled by the expansion of the AI market and stabilization in the PC and smartphone sectors.

Although TSMC's revenue surged by 34% in 2022, it experienced a 9% decline in 2023 due to market slowdowns in the PC and smartphone industries.

ASML's revenue grew by 14% in 2022 and is projected to increase by 30% in 2023, largely driven by the expansion of the AI market and heightened competition among foundries for advanced chip manufacturing.

Looking ahead to 2024, ASML anticipates its revenue growth to flatline as a result of stricter export restrictions on Chinese chipmakers and the transition to newer high-NA EUV systems.

ASML has revised its revenue growth forecast for 2025 down from 43% to a range of 7%-25%, primarily due to the slow adoption of high-NA EUV systems by TSMC and Samsung.

Analysts project that TSMC's revenue and earnings will grow by 24% and 27%, respectively, in 2025, while ASML's growth is expected to be slower and more affected by export curbs against China.

Over the past year, ASML's stock has risen approximately 10%, whereas TSMC's stock has more than doubled, reflecting TSMC's robust market performance.

Both ASML and TSMC are valued at about 23 times forward earnings, but TSMC is regarded as a stronger investment due to its faster growth and better diversification.