Where do those profits go? Presumably TSMC doesn't just sit on it. Surely they either invest it back into their business to stay competitive or deal it out as compensation.
To put that into scale, here's some quotes from TSMC's Wikipedia article[0]:
> In November 2020 officials in Phoenix, Arizona in the United States approved TSMC's plan to build a $12 billion chip plant in the city. [...] In 2021, news reports claimed that the facility may be tripled to roughly a $35 billion investment with six factories.
> In November 2021, TSMC and Sony announced that TSMC would be establishing a new subsidiary named Japan Advanced Semiconductor Manufacturing (JASM) in Kumamoto, Japan. [...]. The initial investment will be approximately $7 billion with Sony investing approximately $500 million for a less than 20% stake.
When you're committing to $42B of investments, $28.4B doesn't seem like all that much to have on hand.
Investments and bonuses are not part of any of those categories. Profits don't just get dumped into a Scrooge McDuck-esque money pool. Businesses obviously keep some money on hand, but it doesn't benefit anyone involved to have the money sit there forever. Profits are eventually used to fund expansions, acquisitions, improvements, charitable donations, rewards, etc.
I don’t think the parent response is correct, though, if by profit (colloquially) we go by earnings that could be distributed to shareholders.
Sure, gross profit would not include either of those expenses. But operating profit would subtract research and development (e.g. the salaries and bonuses of the engineers working on the next process node) and depreciation on new factory (i.e. the cost of the new factory spread out over its useful lifetime - though it doesn’t include a factory under construction). Then you subtract interest and taxes to get to net profit. And TSMC has net profit margins of 39% in 2020!
There's nothing cynical about that, for most companies in the world their entire purpose and primary reason for existence - explicitly and openly stated, and mandated by their bylaws - is to generate this return on investment for the owners.
Like, this is the primary goal; any other uses of profit are valid only with the expectation that they will allow the owners to extract more money later.
I don't think that dividends are typically coupled to inflation. The return on an investment (at least via stock ownership) includes dividends + asset appreciation, right? I would expect the combination to be related to inflation but not necessarily dividends alone. Is that the right way to think about it? I'm not a finance guy.
An idealized company in a static market that has been making the same real (i.e. inflation adjusted) profits for a while and is expected to for quite some time will have its price track inflation, so any dividends paid out will be on top of inflation.
Real life is much messier than the above, due to things like speculation (how much some people think other people will think the company will be worth in a year), changes in the broader market (if the "zero risk" rate of returns goes up or down, then equities, which have higher risk will tend to move in the opposite direction), and such can have drastic effects on a company's market value.
How so? The rich don't benefit from profits being tied up in a business account. If they want that money, they either have to receive it as immediate compensation or invest it in hopes of receiving even greater compensation in the future.
The generally accepted meaning of "compensation" is not related to distribution of profit. All compensation to employees and managers (including bonuses) is a "before-profit" expense; and all distribution of profits to company owners like dividends and stock buybacks is not called compensation, that's an entirely separate category.
