Taiwan Semiconductor (TSM) is the world’s largest contract semiconductor manufacturer with a 56% market share; the company is also at the forefront of the next phase in the evolution of the smartphone, suggests Tony Daltorio, editor of Investors Alley's Growth Stock Advisor.

The company is a winner from the recent announcement about new iPhones from Apple (AAPL). Indeed, Taiwan Semiconductor dominates chip production for Apple ever since it became Taiwan Semi’s biggest client in 2015.

Apple's latest phones are the first devices anywhere to include a chip (A12 Bionic) made with 7 nanometer process technology. That means the width of the features etched on to the silicon has reached a new level of miniaturization, down from the previous 10 nanometers.

The chips are designed by Apple but manufactured by Taiwan Semi. Getting to the 7 nanometer level has been much tougher for the industry than previous moves down in size, and a sign of how Moore’s Law — which predicted regular advances in the number of transistors that can be squeezed on to a chip — is running out of steam.

But there is much more involved here than just size. Apple’s chip includes a specialized accelerator for machine learning known as a neural processing unit. With the promise of applications that can learn from masses of data, this is where much of the effort in new hardware design is now focused.

Last month, GlobalFoundries — the world’s number two semiconductor contract manufacturer — put off its own plans for 7 nanometer chips indefinitely. And Intel (INTC), whose long leadership of the chip industry is now in question, continues to struggle. After several delays, products containing comparable chips will not be available until late next year at the earliest.

This leaves Taiwan Semiconductor in the catbird seat with production of the most advanced processors now left to just two companies – Taiwan Semi and Samsung (SSNLF). 

Taiwan Semiconductor will be the likely the primary beneficiary as advanced technology investment grows too expensive for all but the leading industry players, as advanced technology becomes more of a ‘winner takes all’ business.

Subscribe to Investor Alley's Growth Stock Advisor here…