Investopedia

Samsung, TSM, and NVDA Lead the 10 Biggest Companies List

Reviewed by Gordon Scott
Fact checked by Kirsten Rohrs Schmitt

The modern economy runs on semiconductors. The tiny electronic circuits, named for the electrical properties of the material from which they’re made, are the brains for millions of devices, including space vehicles, car computers, smartphones, medical equipment, and appliances. As applications proliferate, semiconductor manufacturers continue to prosper.

These companies compete to produce smaller, cheaper, and faster chips for increasingly powerful and affordable technology products. Semiconductors can be divided into four main categories: microprocessors, memory chips, commodity integrated circuits, and complex systems on a chip (SoCs).

Key Takeaways

• The highest-revenue semiconductor companies produce a wide range of products, including microprocessors, memory chips, commodity integrated circuits, and complex systems on a chip.
• This diversity allows them to supply various sectors like consumer electronics, automotive, telecommunications, and data centers.
• The list of the top 10 semiconductor companies includes major players from the U.S., South Korea, and the Netherlands. Companies like Samsung Electronics Co. Ltd., Taiwan Semiconductor Manufacturing Company Ltd. (TSMC), and NVIDIA Corp. (NVDA) dominate the market.
• The semiconductor industry is highly competitive, with companies aiming to produce smaller, cheaper, and faster chips.

The semiconductor industry and chipmakers’ stocks tend to be highly cyclical. Still, many investors view the sector as important, given its secular growth trend and significant role in developing new technology.

Below are the 10 top semiconductor companies based on their 12-month trailing (TTM) revenue. This list includes suppliers of semiconductor manufacturing equipment. Some foreign companies may report semiannually, resulting in longer lag times for their financials. All data is as of June 24, 2025 and comes from Morningstar and CompaniesMarketCap.

1. Samsung Electronics (005390.KS)

• Revenue: $219.58 billion
• Net income: $27.89 billion
• Market cap: $293.70 billion
• One-year trailing total return: -23.14% (Day End as of June 23, 2025)
• Exchange: Korean Exchange

A well-known name in the consumer electronics industry, Samsung (005390.KS) also manufactures business appliances and products, health and medical equipment, consumer appliances, robotics, and much more.

2. NVIDIA Corp. (NVDA)

• Revenue: $148.52 billion (as of April 30, 2025)
• Net income: $76.77 billion (as of April 30, 2025)
• Market cap: $3.59 trillion
• One-year trailing total return: 13.94% (Day End as of June 23, 2025)
• Exchange: Nasdaq

NVIDIA is, by market cap, one of the most valuable companies in the world. It develops graphics processors for personal computers and enterprise servers. These graphics processing units, or GPUs, provide high-end performance sought by computer gamers and those who work with computer-aided design.

3. Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)

• Revenue (TTM): $3.140 trillion (as of March 31, 2025)
• Net income (TTM): $1.3 trillion (as of March 31, 2025)
• Market cap: $1.13 trillion
• One-year trailing total return: 22.43% (Day End as of June 23, 2025)
• Exchange: New York Stock Exchange (NYSE)

Taiwan Semiconductor is one of the world’s largest semiconductor foundry, the industry term for contract manufacturing of semiconductors on behalf of customers. Pure-play foundries manufacture integrated circuits on behalf of clients. Many semiconductor companies outsource the manufacturing of their chips to Taiwan Semiconductor.

4. Intel Corp. (INTC)

• Revenue: $53.04 billion (as of March 31, 2025)
• Net income: $-19.20 billion (as of March 31, 2025)
• Market cap: $95.62 billion
• One-year trailing total return: -31.44% (Day End as of June 23, 2025)
• Exchange: Nasdaq

Intel primarily develops processors for the personal computer (PC) and enterprise server markets. Its Client Computing Group segment supplies PC processors, and its Data Center and AI segment serves enterprise customers, including cloud services providers. The remainder consists of internet-of-things (IoT) products for retail, industrial, and healthcare markets; memory and storage products; autonomous driving technology; and programmable semiconductors.

The company also produces motherboard chipsets, network interface controllers, and integrated circuits.

5. Broadcom Inc. (AVGO)

• Revenue: $57.05 billion (as of April 30, 2025)
• Net Income: $12.92 billion (as of April 30, 2025)
• Market Cap: $1.23 trillion
• One-Year Trailing Total Return: 54.7% (Day End as of June 23, 2025)
• Exchange: Nasdaq

Broadcom supplies digital and analog semiconductors as well as software for networking, telecom, and data center markets. It provides interfaces for computers’ Bluetooth connectivity, routers, switches, processors, and fiber optics.

6. Qualcomm Inc. (QCOM)

• Revenue: $42.29 billion (as of March 31, 2025)
• Net income: $11.04 billion (as of March 31, 2025)
• Market cap: $170.88 billion
• One-year trailing total return: -26.33% (Day End as of June 23, 2025)
• Exchange: Nasdaq

Qualcomm is a global semiconductor and telecommunications company that designs and markets wireless communications products and services. Telecommunications companies worldwide use Qualcomm’s code division multiple access technology, which has played an important role in the development of wireless communications. Its Snapdragon chipsets are found in many mobile devices.

7. SK Hynix Inc. (000660.KS)

• Revenue: $50.79 billion
• Net income: $23 billion
• Market cap: $141.14 billion
• One-year trailing total return: 25.91% (Day End as of June 23, 2025)
• Exchange: Korean Exchange

One of the largest memory chipmakers in the world, Hynix chips are used by many companies to manufacture various end products that require memory. The company was founded in 1983 and is headquartered in South Korea. Almost two-thirds of its revenues are generated from the sale of dynamic random access memory and one-third from NAND flash sales.

8. ASML Holding NV (ASML)

• Revenue: $30.71 billion (as of March 31, 2025)
• Net income: $8.7 billion (as of March 31, 2025)
• Market cap: $316.86 billion
• One-year trailing total return: -24.11% (Day End as of June 23, 2025)
• Exchange: Nasdaq

Based in the Netherlands, ASML is a supplier of sophisticated lithography systems used by chip manufacturers to add circuitry to silicon wafers.

9. Applied Materials Inc. (AMAT)

• Revenue: $28.09 billion (as of April 30, 2025)
• Net income: $6.76 billion (as of April 30, 2025)
• Market cap: $143 billion
• One-year trailing total return: -26.25% (Day End as of June 23, 2025)
• Exchange: Nasdaq

Applied Materials is a leading supplier of capital equipment used to manufacture semiconductors. The company’s technology is used to produce high-quality silicon wafers and to deposit microscopic circuitry on their surfaces.

10. Advanced Micro Devices (AMD)

• Revenue: $27.75 billion (as of March 31, 2025)
• Net income: $2.23 billion (as of March 31, 2025)
• Market cap: $221.16 billion
• One-year trailing total return: -19.63% (Day End as of June 23, 2025)
• Exchange: Nasdaq

Advanced Micro Devices (AMD) manufactures computer processing units and graphic processing units for computers, consumer electronics, automobiles, and servers. It is Intel’s most direct competitor and has been battling the tech giant for market share since the 1960s.

Who Is the Largest Semiconductor Company?

That depends on the metric. The largest semiconductor company based on 12-month trailing revenue is Samsung. The largest based on market capitalization is NVIDIA.

Who Are TSMC’s Top Customers?

Taiwan Semiconductor Manufacturing Co. doesn’t disclose the details of its business, although U.S. laws require it to disclose customers who account for over 10% of its revenue. Two companies hit that threshold in 2023: Apple and NVIDIA.

Who Is Bigger: Intel or TSMC?

Taiwan Semiconductor Manufacturing Co. has Intel beat on revenues, net income, and market cap.

The Bottom Line

The 10 biggest semiconductor companies come from the U.S. and South Korea and are generally household names. They also rake in a lot of money. The biggest by sales, Samsung, generated over $200 billion in revenue in the 12 months to Dec. 31, 2024, relatively low for the industry. Other big players include NVIDIA, one of the largest companies in the world by market cap; Taiwan Semiconductor Manufacturing Co., one of the world’s largest semiconductor foundry; and Intel, known for its cloud computing, data center, and PCs.

Fact checked by Michael Rosenston
Reviewed by Andy Smith

Investors who buy into exchange-traded funds (ETFs) typically see lower fees than those charged for mutual funds. In 2024, the average expense ratio for an index equity ETF was 0.14%. The average cost for an equity mutual fund was 0.40%. Overall, the average fees for investors have seen a steady decline.

Key Takeaways

• Mutual fund companies have steadily cut their fees to compete with low-cost exchange-traded funds (ETFs).
• ETFs have lower costs on average than passively managed mutual funds and don’t charge 12b-1 fees.
• The expense ratio is the cost of fund, including any management fees, fees for expenses, and 12b-1 fees, and expressed as a percentage of the total assets under management.

Mutual Fund Fees

The expense ratio is reported in every mutual fund prospectus, which details the costs to investors. The expense ratio is the total cost of the fund, including any management fees, fees for expenses, and 12b-1 fees. It is expressed as a percentage of the total assets under management. Mutual funds may include all or some of these fees:

• Management fees compensate those who trade the fund’s portfolio.
• 12b-1 fees pay marketing costs and, sometimes, employee bonuses and cannot exceed 1% of the investor’s assets.
• Account fees may apply to accounts that fall below a specified value.
• Redemption fees may be imposed to penalize short-term trading.
• Exchange fees may be charged for moving money between funds at the same company.
• Purchase fees may be levied at the time shares of a fund are bought.

Note

The fee to purchase shares is the “load fee” paid to the broker or agent who sells the shares. This is a one-time charge, typically 5% of the amount invested. The legal maximum is 8.5%. Many “no-load” funds are available so investors can avoid this cost.

ETF Fees

Exchange-traded funds have costs, but they are not reflected in their statements. They are deducted daily from the net asset value of the fund. The administrative costs of managing ETFs are commonly lower than those for mutual funds.

Most ETFs are passively managed funds and always “no-load,” meaning there is no purchase fee. Online brokers offer commission-free ETF trades. Unlike mutual funds, ETFs do not charge annual 12b-1 fees. These fees are advertising, marketing, and distribution costs that a mutual fund passes to its shareholders. Each investor pays for the fund company to acquire new shareholders.

Important

In Jan. 2024, the SEC approved eleven spot bitcoin ETFs that will trade on the NYSE Arca, Cboe BZX, and Nasdaq exchanges. On May 23, 2024, the SEC approved applications from the same exchanges to list spot ether ETFs, which began trading in July 2024.

ETFs keep their administrative and operational expenses down through market-based trading. Because ETFs are bought and sold on the open market, the sale of shares from one investor to another does not affect the fund. The sale of ETF shares does not require the fund to liquidate its holdings or generate tax implications from capital gains, keeping costs to investors lower.

What Is the Difference Between an Actively or Passively Managed Mutual Fund?

An actively managed fund has a manager, or a team, devoted to buying and selling stock frequently. Their goal is to beat the performance of a particular benchmark index.

A passively managed fund is set up to mimic a specific benchmark index. No investing decisions are made. The only buying and selling are done to mirror changes in the index. 

How Do Capital Gains Affect the Fees of Mutual Funds and ETFs?

When mutual fund shareholders sell shares, they redeem them from the fund directly. That often requires the fund to sell some assets to cover the redemption. When the fund sells off part of its portfolio, it generates a capital gains distribution to all shareholders. Mutual fund shareholders pay income taxes on those distributions, and the fund company handles transactions, increasing its operating expenses. Since the sale of ETF shares does not require the fund to liquidate its holdings, its costs are lower.

What Is In-Kind Redemption for an ETF?

ETFs use in-kind creation and redemption practices to keep costs down. Investors can trade a collection, or basket, of stock shares that match the fund’s portfolio for an equivalent number of ETF shares. An investor can redeem shares by swapping them for an equivalent basket of stocks rather than selling them on the secondary market. The fund does not have to buy or sell securities to create or redeem shares, reducing the paperwork and operational expenses incurred by the fund.

The Bottom Line

Exchange-traded funds (ETFs) investors typically incur lower fees than those charged for mutual funds, and mutual fund companies have had to curtail fees to compete with low-cost ETFs. Most ETFs are passively managed funds, always “no-load,” with lower operational, marketing and administrative costs passed to investors.

Reviewed by Eric Estevez
Fact checked by Michael Rosenston

What Is Contribution Margin?

The contribution margin can be stated on a gross or per-unit basis. It represents the incremental money generated for each product/unit sold after deducting the variable portion of the firm’s costs.

The contribution margin is computed as the selling price per unit, minus the variable cost per unit. Also known as dollar contribution per unit, the measure indicates how a particular product contributes to the overall profit of the company.

It provides one way to show the profit potential of a particular product offered by a company and shows the portion of sales that helps to cover the company’s fixed costs. Any remaining revenue left after covering fixed costs is the profit generated.

Key Takeaways

• The contribution margin represents the portion of a product’s sales revenue that isn’t used up by variable costs, and so contributes to covering the company’s fixed costs.
• The concept of contribution margin is one of the fundamental keys in break-even analysis.
• Low contribution margins are present in labor-intensive companies with few fixed expenses, while capital-intensive, industrial companies have higher fixed costs and thus, higher contribution margins.

Formula and Calculation of Contribution Margin

The contribution margin is computed as the difference between the sale price of a product and the variable costs associated with its production and sales process. This is expressed through the following formula:

$begin{aligned}&textbf{C}=textbf{R}-textbf{V}end{aligned}$​C=R−V​

Where C is the contribution margin, R is the total revenue, and V represents variable costs.

It may also be useful to express the contribution margin as a fraction of total revenue. In this case, the Contribution Margin Ratio (CR) is expressed as the contribution margin, divided by total revenues in the same time period:

$begin{aligned}&textbf{CR}=frac{textbf{(R}-textbf{V)}}{textbf{R}}end{aligned}$​CR=R(R−V)​​

What Contribution Margin Can Tell You

The contribution margin is the foundation for break-even analysis used in the overall cost and sales price planning for products. The contribution margin helps to separate out the fixed cost and profit components coming from product sales and can be used to determine the selling price range of a product, the profit levels that can be expected from the sales, and structure sales commissions paid to sales team members, distributors, or commission agents.

Fixed Cost vs. Variable Cost

Fixed costs are costs that are incurred independent of how much is sold or produced. The business pays them to establish itself and exist. Buying items such as machinery is a typical example of a fixed cost, specifically a one-time fixed cost. Regardless of how much it is used and how many units are sold, its cost remains the same. However, these fixed costs become a smaller percentage of each unit’s cost as the number of units sold increases.

Another common example of a fixed cost is the rent paid for a business space. A store owner will pay a fixed monthly cost for the store space regardless of how many goods are sold.

On the other hand, variable costs are costs that depend on the amount of goods and services a business produces. For example, a factory needs raw materials to produce products. The more it produces in a given month, the more raw materials it requires. Those raw materials are therefore a variable cost. Likewise, a cafe owner needs things like coffee and pastries to sell to visitors. The more customers she serves, the more food and beverages she must buy. Their cost is variable. These costs would be included when calculating the contribution margin.

Fixed costs are often considered sunk costs that once spent cannot be recovered. These cost components should not be considered while making decisions about cost analysis or profitability measures.

Contribution Margin vs. Gross Profit Margin

The contribution margin is different from the gross profit margin, the difference between sales revenue and the cost of goods sold. While contribution margins only count the variable costs, the gross profit margin includes all of the costs that a company incurs in order to make sales.

The contribution margin shows how much additional revenue is generated by making each additional unit of a product after the company has reached the breakeven point. In other words, it measures how much money each additional sale “contributes” to the company’s total profits.

Example of Contribution Margin

Say a machine for manufacturing ink pens comes at a cost of $10,000. Manufacturing one ink pen requires $0.2 worth of raw materials like plastic, ink and nib, another $0.1 goes towards the electricity charges for running the machine to produce one ink pen, and $0.3 is the labor charge to manufacture one ink pen.

These three components constitute the variable cost per unit. The total variable cost of manufacturing an ink pen comes to ($0.2 + $0.1 + $0.3) = $0.6 per unit. If a total of 100 ink pens are manufactured, the total variable cost will come to ($0.6 * 100 units) = $60, while manufacturing 10,000 ink pens will lead to a total variable cost of ($0.6 * 10,000 units) = $6,000. Such total variable cost increases in direct proportion to the number of units of the product getting manufactured.

However, ink pen production will be impossible without the manufacturing machine which comes at a fixed cost of $10,000. This cost of the machine represents a fixed cost (and not a variable cost) as its charges do not increase based on the units produced. Such fixed costs are not considered in the contribution margin calculations.

If a total of 10,000 ink pens are manufactured using the machine at a variable cost of $6,000 and at a fixed cost of $10,000, the total manufacturing cost comes to $16,000. The per-unit cost will then be computed as $16,000/10,000 = $1.6 per unit. If each ink pen is sold at a price of $2 per unit, the profit per unit comes to

$begin{aligned}&(text{SP}-text{TC})=($2.0-$1.6)=$0.4text{ per Unit}\&textbf{where:}\&text{SP}=text{Sales price}\&text{TC}=text{Total costs}end{aligned}$​(SP−TC)=($2.0−$1.6)=$0.4 per Unitwhere:SP=Sales priceTC=Total costs​

However, the contribution margin does not account for fixed cost components and considers only the variable cost components. The incremental profit earned for each unit sold as represented by contribution margin will be:

$begin{aligned}&(text{SP}-text{TVC})=($2.0-$0.6)=$1.4text{ per Unit}\&textbf{where:}\&text{SP}=text{Sales price}\&text{TVC}=text{Total variable costs}end{aligned}$​(SP−TVC)=($2.0−$0.6)=$1.4 per Unitwhere:SP=Sales priceTVC=Total variable costs​

A key characteristic of the contribution margin is that it remains fixed on a per unit basis irrespective of the number of units manufactured or sold. On the other hand, the net profit per unit may increase/decrease non-linearly with the number of units sold as it includes the fixed costs.

Uses of Contribution Margin

The contribution margin can help company management select from among several possible products that compete to use the same set of manufacturing resources. Say that a company has a pen-manufacturing machine that is capable of producing both ink pens and ball-point pens, and management must make a choice to produce only one of them.

If the contribution margin for an ink pen is higher than that of a ball pen, the former will be given production preference owing to its higher profitability potential. Such decision-making is common to companies that manufacture a diversified portfolio of products, and management must allocate available resources in the most efficient manner to products with the highest profit potential.

Contribution Margin for Investors

Investors and analysts may also attempt to calculate the contribution margin figure for a company’s blockbuster products. For instance, a beverage company may have 15 different products but the bulk of its profits may come from one specific beverage.

Along with the company management, vigilant investors may keep a close eye on the contribution margin of a high-performing product relative to other products in order to assess the company’s dependence on its star performer.

The company steering its focus away from investing or expanding the manufacturing of the star product, or the emergence of a competitor product, may indicate that the profitability of the company and eventually its share price may get impacted.

How to Improve Contribution Margin

Based on the contribution margin formula, there are two ways for a company to increase its contribution margins; They can find ways to increase revenues, or they can reduce their variable costs.

Variable costs tend to represent expenses such as materials, shipping, and marketing, Companies can reduce these costs by identifying alternatives, such as using cheaper materials or alternative shipping providers.

Alternatively, the company can also try finding ways to improve revenues. For example, they can simply increase the price of their products. However, this strategy could ultimately backfire, and hurt profits if customers are unwilling to pay the higher price.

When to Use Contribution Margin Analysis

Investors examine contribution margins to determine if a company is using its revenue effectively. A high contribution margin indicates that a company tends to bring in more money than it spends.

Very low or negative contribution margin values indicate economically nonviable products whose manufacturing and sales eat up a large portion of the revenues.

Low values of contribution margins can be observed in the labor-intensive industry sectors like manufacturing as the variable costs are higher, while high values of contribution margins are prevalent in the capital-intensive sectors.

The concept of contribution margin is applicable at various levels of manufacturing, business segments, and products. The figure can be computed for an entire corporation, for a particular subsidiary, for a particular business division or unit, for a particular center or facility, for distribution or sales channel, for a product line, or for individual products.

How Do You Calculate Contribution Margin?

Contribution margin is calculated as Revenue – Variable Costs. The contribution margin ratio is calculated as (Revenue – Variable Costs) / Revenue.

What Is a Good Contribution Margin?

The best contribution margin is 100%, so the closer the contribution margin is to 100%, the better. The higher the number, the better a company is at covering its overhead costs with money on hand.

What Is the Difference Between Contribution Margin and Profit Margin?

Profit margin is calculated using all expenses that directly go into producing the product. Contribution margin only takes into account variable costs.

The Bottom Line

The contribution margin represents the revenue that a company gains by selling each additional unit of a product or good. This is one of several metrics that companies and investors use to make data-driven decisions about their business. As with other figures, it is important to consider contribution margins in relation to other metrics rather than in isolation.

Reviewed by Margaret James
Fact checked by David Rubin

What Is a Budget?

A budget is a forecast of revenue and expenses over a specified future period. Budgets are utilized by corporations, governments, and households and are an integral part of running a business (or household) efficiently. Budgeting for companies serves as a plan of action for managers as well as a point of comparison at a period’s end.

The budgeting process for companies can be challenging, particularly if customers don’t pay on time or revenue and sales are intermittent. There are several types of budgets that companies use, including operating budgets and master budgets as well as static and flexible budgets. In this article, we explore how companies approach budgeting as well as how companies deal with missing their budgets.

Key Takeaways

• A budget is a forecast of revenue and expenses over a specified period and is an integral part of running a business efficiently.
• A static budget is a budget with numbers based on planned outputs and inputs for each of the firm’s divisions.
• A cash-flow budget helps managers determine the amount of cash being generated by a company during a period.
• Flexible budgets contain the actual results and are compared to the company’s static budget to identify any variances.

How Budgets Work

Although the budgeting process for companies can become complex, at its most basic, a budget compares a company’s revenue with its expenses in a given period. When they spend more than what was budgeted they can create a revenue deficit.

Of course, determining how much to spend on various expenses and projecting sales is only one part of the process. Company executives also have to contend with a myriad of other factors, including projecting capital expenditures, which are large purchases of fixed assets such as machinery or a new factory. They must also plan for their ongoing cash needs, revenue shortfalls, and the economic backdrop. Regardless of the type of business, the ability to gauge performance using budgets is critical to a company’s overall financial health.

Types of Budgets

Below are a few of the most common types of budgets that corporations use to accurately forecast their numbers.

Master Budget

Most companies will start with a master budget, which is a projection for the overall company. Master budgets typically forecast the entire fiscal year. The master budget will include projections for items on the income statement, the balance sheet, and the cash flow statement. These projections can include revenue, expenses, operating costs, sales, and capital expenditures.

Static Budget

A static budget is a budget with numbers based on planned outputs and inputs for each of the firm’s divisions. A static budget is usually the first step of budgeting, which determines how much a company has and how much it will spend. The static budget looks at fixed expenses, which are not variable or dependent on production volumes and sales. For example, rent would be a fixed cost regardless of the sales volume for a company.

Some industries such as nonprofits receive donations and grants resulting in a static budget from which they can’t exceed. Other industries use static budgets as a starting point or a baseline number, similar to the master budget, and make adjustments at the end of the fiscal year if more or less is needed in the budget. When creating a static budget, managers use economic forecasting methods to determine realistic numbers.

Operating Budget

The operating budget includes the expenses and revenue generated from the day-to-day business operations of the company. The operating budget focuses on the operating expenses, including cost of goods sold (COGS) and the revenue or income. COGS is the cost of direct labor and direct materials that are tied to production.

The operating budget also represents the overhead and administrative costs directly tied to producing the goods and services. However, the operating budget doesn’t include items such as capital expenditures and long-term debt.

Cash-Flow Budget

A cash-flow budget helps managers determine the amount of cash being generated by a company during a specific period. The inflows and outflows of cash for a company are important because expenses need to be paid on time from the cash generated. For example, monitoring the collection of accounts receivables, which is money owed by customers, can help companies forecast the cash due in a particular period.

This process can be challenging if too many customers are past-due. To compensate for this, many businesses create something called an “allowance for doubtful accounts,” which estimates the amount of accounts receivable that are expected to not be collectible.

Cash flow budgets help to examine past practices to examine what’s working and what’s not and make adjustments. For example, a company could apply for a short-term working capital line of credit from a bank to ensure they have cash in the event a client pays late. Also, companies can ask for more flexible options for their accounts payables, which is money owed to suppliers, to help with any short-term cash-flow needs.

Using a Budget To Evaluate Performance

Once a period has ended, management must compare the forecasts from the static or master budget to the company’s performance. It’s at this stage that companies calculate whether the budget came in line with planned expenditures and income.

Flexible Budget

A flexible budget is a budget containing figures based on actual output. The flexible budget is compared to the company’s static budget to identify any variances (or differences) between the forecasted spending and the actual spending.

With a flexible budget, budgeted dollar values (i.e., costs or selling prices) are multiplied by actual units to determine what particular number will be given to a level of output or sales. The calculation yields the total variable costs involved in production. The second component of the flexible budget is the fixed costs. Typically, fixed costs do not differ between static and flexible budgets.

Since flexible budgets use the current period’s numbers—sales, revenue, and expenses—they can help create forecasts based on multiple scenarios. Companies can calculate various outcomes based on different outputs, such as sales or units produced. Flexible or variable budgets help managers plan for both low output and high output to help ready themselves regardless of the outcome.

Budget Variances

As stated earlier, variances can arise between the static budget and the actual results. The two common variances are called the flexible budget variance and sales-volume variance.

The flexible budget variance compares the flexible budget to actual results to determine the effects that prices or costs have had on operations. By comparison, the sales-volume variance compares the flexible budget to the static budget to determine the effect that a company’s level of sales activity had on its operations.

From these two budgets, a company can develop individual flexible and static budgets for any element of its operations. The variances are classified as either favorable or unfavorable.

If the sales-volume variance is unfavorable (flexible budget is less than static budget), the company’s sales (or production with a production volume variance) will turn out to be less than anticipated.

If, however, the flexible budget variance was unfavorable, it would be the result of prices or costs. By knowing where the company is falling short or exceeding the mark, managers can evaluate the company’s performance more efficiently and use the findings to make any necessary changes.

Important

A flexible budget can help companies account for both variable and fixed expenses, creating a more dynamic process and leading to more accurate forecasts.

Implementing Budgets

For most companies, expenses pop up from time to time. Static budgets typically act as a guideline, meaning they can be changed or adjusted once the variances have been identified via a flexible budget. Understanding the different types of budgeting, managers can gain a wealth of information through the analysis of budget variances leading to better-informed business decisions.

There are many hurdles to overcome

Reviewed by Akhilesh Ganti
Fact checked by Suzanne Kvilhaug

Can forex trading make you rich? Although our instinctive reaction to that question would be an unequivocal “No,” we should qualify that response. Forex trading may make you rich if you are a hedge fund with deep pockets or an unusually skilled currency trader. But for the average retail trader,  what is often promoted as an easy road to riches, can quickly become a rocky highway to enormous losses and potential penury.

Key Takeaways

• Many retail traders turn to the forex market in search of fast profits.
• Statistics show that most aspiring forex traders fail, and some even lose large amounts of money.
• Leverage is a double-edged sword, as it can lead to outsized profits but also substantial losses.
• Counterparty risks, platform malfunctions, and sudden bursts of volatility also pose challenges to would-be forex traders.
• Unlike stocks and futures that trade on exchanges, forex pairs trade in the over-the-counter market with no central clearing firm.

Unexpected Events

To better understand the danger of forex trading, consider an example. On Jan. 15, 2015, the Swiss National Bank abandoned the Swiss franc’s cap of 1.20 against the euro that it had in place for three years. As a result, the Swiss franc soared by 41% against the euro in the first 20 minutes. It then stabilized at 1.05, around a 14% gain.

The surprise move from Switzerland’s central bank inflicted losses running into the hundreds of millions of dollars on innumerable participants in forex trading, from small retail investors to large banks. Losses in retail trading accounts wiped out the capital of at least two brokerages, rendering them insolvent, and took FXCM, then the largest retail forex brokerage in the United States, to the verge of bankruptcy.

Unexpected one-time events are not the only risk facing forex traders. Here are seven other reasons why the odds are stacked against the retail trader who wants to get rich trading the forex market.

Important

Massive forex plays, such as George Soros’ run on the British Pound that netted him $2 billion in profits, are very the exception and not the rule.

Excessive Leverage

Although currencies can be volatile, violent gyrations like that of the aforementioned Swiss franc are not that common. For example, a substantial move that takes the euro from 1.20 to 1.10 versus the U.S. dollar over a week is still a change of less than 10%. The allure of forex trading lies in the huge leverage forex brokers provide, which can magnify gains (and losses).

A trader who shorts $5,000 worth of euros against the U.S. dollar at 1.20 and then covers the short position at 1.10 would make a tidy profit of $500 or 8.33%. If the trader used the maximum leverage of 50:1 permitted in the U.S. (ignoring trading costs and commissions) the profit is $25,000, or 416.67%.

Of course, had the trader been long euro at 1.20, used 50:1 leverage, and exited the trade at 1.10, the potential loss would also have been $25,000. In some overseas jurisdictions, leverage can be as much as 200:1 or even higher. Because excessive leverage is the single biggest risk factor in retail forex trading, regulators in a number of nations are clamping down on it.

Asymmetric Risk to Reward

Seasoned forex traders keep their losses small and offset these with sizable gains when their currency call proves to be correct. Most retail traders, however, do it the other way around, making small profits on a number of positions but then holding on to a losing trade for too long and incurring a substantial loss. The biggest risk in holding on to a highly-leveraged losing position is the possibility of losing more than your initial investment.

Platform or System Malfunction

Imagine your plight if you have a large position and are unable to close a trade because of a platform malfunction or system failure, which could be anything from a power outage to an Internet overload or computer crash. This category would also include exceptionally volatile times when orders such as stop-losses do not work. For instance, many traders had tight stop-losses in place on their short Swiss franc positions before the currency surged on Jan. 15, 2015. However, these proved ineffective because the liquidity dried up.

No Information Edge

The biggest forex trading banks have massive trading operations that are deeply integrated into the currency markets and have an information edge, by access to data such as  commercial forex flows and covert government intervention. Such information is simply not available to the retail trader.

Currency Volatility

Recall the Swiss franc example. High degrees of leverage mean that trading capital can be depleted very quickly during periods of unusual currency volatility. These events can come suddenly and move the markets before most individual traders have an opportunity to react.

OTC Market

The forex market is an over-the-counter market that is not centralized and regulated like the stock or futures markets. This also means that forex trades are not guaranteed by any type of clearing organization, which can give rise to counterparty risk.

$6 Trillion Daily

While the forex OTC market is decentralized, it is massive, with data from a 2022 Triennial Central Bank Survey of Foreign Exchange showing that more than $7.5 trillion worth of currencies trade each day.

Fraud and Market Manipulation

There have been occasional cases of fraud in the forex market, such as that of Secure Investment, which disappeared with more than $1 billion of investor funds in 2014. Market manipulation of forex rates has also been rampant and has involved some of the biggest players. In May 2015, for example, five major banks were fined nearly $6 billion for attempting to manipulate exchange rates between 2007 and 2013, bringing total fines levied on these five banks to nearly $9 billion.

A common way for market movers to manipulate the markets is through a strategy called stop-loss hunting. These large organizations will coordinate price drops or rises to where they anticipate retail traders will have set their stop-loss orders. When those are triggered automatically by price movement, the forex position is sold, and it can create a waterfall effect of selling as each stop-loss point is triggered, and can net large profits for the market mover.

Is Trading Forex Profitable?

Forex trading can be profitable but it is important to consider timeframes. It is easy to be profitable in the short-term, such as when measured in days or weeks. However, to be profitable over multiple years, it’s usually much easier when you have a large amount of cash to leverage, and you have a system in place to manage risk. Many retail traders do not survive forex trading for more than a few months or years.

Is Forex High Risk?

Although forex trades are limited to percentages of a single point, they are very high risk. The amount needed to turn a significant profit in forex is substantial and so many traders are highly leveraged. The hope is that their leverage will result in profit but more often than not, leveraged positions increase losses exponentially.

Is Forex Riskier Than Stocks?

Forex trading is a different trading style than how most people trade stocks. The majority of stock traders will purchase stocks and hold them for months, years and even decades, whereas forex trading is done by the minute, hour, and day. The timeframes are much shorter and the price movements have a more pronounced effect due to leverage. A 1% move in a stock is not much, but a 1% move in a currency pair is fairly large.

The Bottom Line

If you still want to try your hand at forex trading, it would be prudent to use a few safeguards: limit your leverage, keep tight stop-losses, and use a reputable forex brokerage. Although the odds are still stacked against you, at least these measures may help you level the playing field to some extent.

Online brokerage accounts make trading a seamless process, but there are certain rules investors need to follow. One of the most common pitfalls has to do with trade settlement. Shares purchased or sold with funds that have not been adequately settled will result in violations. Although violations can occur in both cash and margin accounts, they are far more prevalent in the former. Below, we outline key issues investors need to be aware of when trading in cash accounts. 

Key Takeaways

• Only available funds can be used to make purchases in cash accounts.
• Margin accounts allow borrowing additional money from your broker to place trades. 
• Purchasing shares with unsettled funds can result in violations.  
• Cash accounts are more susceptible to settlement-related violations.

What Is a Cash Account?

A cash account is a type of brokerage account that allows investors to purchase securities using only funds available in their account. They cannot borrow additional funds from their broker. This type of account is governed by Regulation T, which ensures that investors are limited to using their own, settled funds for trades.

A cash account is typically the default type of account a broker will open for new clients, unless they specifically request a margin account. Cash accounts are also standard for individual retirement accounts (IRAs).

Cash Account vs. Margin Account

Unlike cash accounts, margin accounts allow investors to pay for securities with funds borrowed from a broker. The funds can be used to leverage the account’s buying power or to place trades while the actual cash is being settled. 

Cash accounts limit risk to the amount invested. By contrast, margin accounts introduce leverage, allow account holders to carry positions greater than the account’s cash value, and may amplify gains and losses alike.

Common Cash Account Violations

Good Faith Violations

Closing a position before it was paid for with settled funds is considered a “good faith violation,” as the investor made no obvious effort to deposit additional cash into the account prior to the settlement date. Brokers choose how to enforce these violations, and each broker may enforce them differently. Having three or more good faith violations within a 12-month period will likely result in a 90-day restriction on your account that limits you to trading fully funded positions only.   

Freeriding Violations

An investor commits a freeriding violation when they buy securities in a cash account without enough settled funds and sell them before enough funds settle to fund the original purchase.  This violation may generate more severe consequences than the others; a broker may take action immediately after the first violation and restrict trading to fully funded purchases for 90 days.  

Cash Liquidation Violations

This violation happens when an investor buys securities without enough settled funds and then sells shares in a different security to cover the purchase. Because the first trade settles before the second one, the investor won’t have the necessary settled funds in time to cover the initial buy, resulting in a violation. The consequences of this violation are less severe. After more than one violation within a specified time, a broker may restrict account access for 90 days. 

The Bottom Line

Cash accounts come with greater settlement-related restrictions than margin accounts. The consequences of violating these restrictions are inconvenient, at a minimum, but can also become costly, depending on an investor’s circumstances. Knowing the rules makes it easy to avoid these cash account violations.

Insurance is its largest source of earnings before taxes

Reviewed by Khadija Khartit

Berkshire Hathaway Inc. (BRK.A; BRK.B) is a diversified holding company whose subsidiaries engage in insurance, freight rail transportation, energy generation and distribution, services, manufacturing, retailing, and other activities. Berkshire also holds a large portfolio of equity securities and derivatives, which heavily impact the company’s reported financial performance.

The company’s list of competitors reflects Berkshire’s diverse family of businesses and includes insurance companies All State Corp. (ALL), Progressive Corp. (PGR), and Jefferies Financial Group Inc. (JEF); freight rail companies Union Pacific Corp. (UNP) and CSX Corp. (CSX); and utility and electricity companies General Electric Co. (GE) and NextEra Energy Inc. (NEE). Berkshire also competes with various manufacturers and retailers.

Key Takeaways

• Berkshire Hathaway owns businesses in insurance, rail transportation, energy generation and distribution, manufacturing, and retailing.
• The company is also a large stakeholder in many prominent companies in the U.S., such as American Express and Coca-Cola.
• Insurance generates the most revenue as well as the most earnings before taxes.
• In Jan. 2024, Berkshire announced that it had purchased the remaining 20% interest in Pilot Travel Centers LLC (PTC) on top of its previous stake, making Berkshire the sole owner of PTC, owning 100% of the company.

Berkshire Hathaway’s Financials

Berkshire announced in May 2025 its financial results for its first quarter of 2025, which ended March 31, 2025. Total revenue for the quarter was $89.725 billion, slightly lower than the first quarter of 2024. Net earnings were $4.672 billion, significantly less than $12.702 billion in earnings during 2024’s first quarter.

As of changes made to GAAP in 2018, the company is required to include unrealized gains and losses arising from changes in its investment portfolio in its reported earnings. This accounting change contributes to the company’s earnings being significantly more volatile than they otherwise would be.

Berkshire’s net income attributable to its shareholders was $4.602 billion during the first quarter of 2025, slightly lower than overall net income. Earnings before taxes (EBT), which the company uses as a profitability metric for its individual business segments, was $5.148 billion, with an income tax expense of $476 million. These numbers were far lower than the first quarter of 2024.

While the company generated solid revenues from its insurance and railroad, utilities, and energy businesses, its losses on investments resulted in a big hit to income. Berkshire Hathaway reported $6.435 billion in investment loses during the 2025’s first quarter.

Berkshire Hathaway’s Business Segments

Berkshire provides a breakdown of seven major business segments for revenue and EBT, a measure of profitability before income taxes. Total revenue and EBT for these segments in Q3 2023 were $93.2 billion and $12.1 billion, respectively, which does not include gains and losses from Berkshire’s portfolio of investments and derivatives.

To reconcile the company’s total business segment revenue with its total consolidated revenue mentioned in the above section of this article, a “corporate, eliminations, and other” adjustment of $11 million must be subtracted from the business segment revenue of $93.2 billion.

The below results look at revenue before taking into account “corporate, eliminations, and other,” and EBT before taking into account investment losses.

Insurance

Berkshire’s underwriting businesses include:

• GEICO, private passenger automobile insurance
• Berkshire Hathaway Primary Group, property and casualty policies for commercial accounts
• Berkshire Hathaway Reinsurance Group, for excess-of-loss, quota-share, and facultative reinsurance
• The insurance business also includes investment income

Revenue grew by 18.9% in Q3 2023 to $24.3 billion and EBT grew by 1,433% to $5.9 billion. Revenue from Insurance comprised 26% of the total and EBT about 49.2% of earnings.

BNSF Railway

Burlington Northern Santa Fe (BNSF), Berkshire’s freight rail transportation business, operates one of the largest systems in North America. BNSF Railway ships coal as well as consumer, industrial, and agricultural products.

BNSF Railway’s revenue fell 12.6% in Q3 2023 to $5.8 billion and EBT fell 14.6% to $1.6 billion. Rail transport comprised 6.3% of Berkshire’s total revenue and generated 13.3% of total EBT.

Berkshire Hathaway Energy

Berkshire Hathaway Energy is a global energy company with subsidiaries that generate and distribute energy and engage in real estate brokerage activities.

The segment’s revenue fell by 3.7% in Q3 2023 to $7.3 billion and EBT fell by 111% to a loss of $147 million. Revenue comprised 7.8% of companywide revenue and EBT did not contribute to earnings due to the loss.

Manufacturing

Berkshire’s manufacturing businesses fall into three categories: industrial products, building products, and consumer products.

Manufacturing revenue grew 0.92% in Q3 2023 to $19.2 billion and EBT rose 6.7% to $3.1 billion. Manufacturing accounted for 20.6% of total revenue and 25.5% of total EBT.

McLane Company

McLane is a wholesale distributor that serves businesses including convenience stores, discount retailers, wholesale clubs, pharmacies, and more. It’s separated into three units: grocery distribution, foodservice distribution, and beverage distribution.

Revenue fell by 0.68% in Q3 2023 to $13.5 billion and EBT grew by 3.6% to $116 million. McLane comprises 14.5% of total revenue but only 0.96% of EBT.

Pilot Travel Centers (PTC)

PTC operates travel centers in North America under the brand names “Pilot” or “Flying J” and has more than 750 travel centers across 44 states and six provinces in Canada. The company is also involved in wholesale fuel and fuel marketing platforms.

A controlling interest in PTC was acquired by Berkshire in 2023 so there is no comparison data for the same period the year before. In Q3 2023, the segment made up 14.1% of revenues and 2.4% of EBT.

Service and Retailing

The service businesses include grocery and food service distribution, professional aviation training, fractional aircraft ownership, and distribution of electronic components as well as media businesses and logistics businesses.

The retail businesses include automotive products, home furnishings, and other operations that sell various consumer products.

Segment revenue rose 4% in Q3 2023 to $9.9 billion and EBT fell by 1.3% to $1.2 billion. The segment comprised 10.7% of total revenue and 9.8% of total EBT.

Investment and Derivative Gains and Losses

Berkshire Hathaway also owns a large portfolio of equity securities and derivatives. Its concentrations are in Apple Inc. (AAPL), Bank of America Corp. (BAC), Coca-Cola (KO), Chevron (CVX), and American Express Co. (AXP). The portfolio posted a loss of $29.8 billion in Q3 2023, compared to a loss of $13.5 billion for the same period in 2022.

Berkshire Hathaway’s Recent Developments

In Jan. 2024, Berkshire announced that it had purchased the remaining 20% interest in Pilot Travel Centers LLC. The company now owns 100% of PTC as it had purchased stakes in the company previously.

Fact checked by Betsy Petrick

A 40-year mortgage may be rare, but it can make home ownership more affordable. This is because it can spread out your mortgage payments over a longer time. While the affordability and flexibility this type of mortgage offers are appealing, the total interest you’ll end up paying and the longer time it’ll take to build equity might not be worth the risk.

Key Takeaways

• The 40-year mortgage lowers your payment by spreading the amount owed over a longer time frame.
• While this arrangement will make payments more affordable in the short term, you’ll pay more in interest and take longer to build equity in your home.
• Offered by traditional and online lenders, 40-year mortgages are commonly used as loan modifications.

What Makes 40-Year Mortgages So Popular?

Forty-year mortgages may not be widely known. These mortgage products are considered non-qualified, which means they don’t meet the standards set by the Consumer Financial Protection Bureau (CFPB).

However, 40-year mortgages are offered by traditional and non-traditional lenders. They may be used for new purchases in rare cases but are commonly used for loan modifications, especially for borrowers who may be on the verge of default and/or foreclosure.

Taking on a 40-year mortgage makes it more affordable to keep your home. That’s because it lowers your monthly payment by spreading out your mortgage repayment over a longer period.

Reasons Behind the Trend

Many of the factors that contributed to the rise of the 40-year mortgage are economic. For instance, increased labor, material, and construction costs often lead to higher real estate values, which make it harder for homeowners to afford the payments associated with traditional 30-year mortgages.

Inflation and the rising cost of living can also have an impact on why the 40-year mortgage is such a popular loan option. Many homeowners in the United States are looking for better ways to finance or refinance their home loans as prices increase and wages for most workers have remained stagnant since the 1970s.

A shortage of housing supply and higher demand, especially in more desirable areas, further drives up prices. This gives sellers less incentive to lower prices and makes it more challenging for borrowers to find affordable options. If they do find them, they’ll need loans that give them payments they can afford, which the 40-year mortgage may offer.

Making a lump-sum payment can significantly reduce your principal balance and the amount of interest you owe. Be sure to check your loan documents to see if there are any prepayment penalties or other consequences for paying off your mortgage early.

Long-Term Impact of 40-Year Mortgages

Although 40-year mortgages can make life more affordable, there are some negatives you have to take into account before you go looking for one.

• Higher interest costs: Your payments may be lower, but stretching out your repayment term means you’ll pay more in interest over the life of your mortgage. The bulk of your mortgage payment is dedicated to interest during the earlier years. As time goes on, this shifts, with more of the payment going toward the principal balance until the loan is paid off in full.
• Higher interest rates: These mortgages are generally considered riskier than traditional ones because they involve a longer repayment period. As such, the interest rates are also typically higher. Keep in mind, however, that your credit score and other factors will also affect your rate.
• Slower equity building: Having a longer loan means it takes longer to build equity in your home. This is because less of your payment is going toward reducing the principal balance. As such, a 40-year mortgage doesn’t give you much flexibility in the future, especially if you need to refinance, take out a home equity loan, or sell your home.
• Impact on your retirement: If you refinance with a 40-year mortgage, there’s a good chance that you could be repaying well into retirement, which means you could be dedicating a significant portion of your retirement income to mortgage payments. Carrying a mortgage during retirement isn’t inherently a bad thing, but it does limit your ability to accumulate wealth and increases the risk of foreclosure.

Additional Considerations

Another thing to consider regarding a 40-year mortgage is the limited availability of these loans. You may have trouble finding a lender that offers a 40-year mortgage because they aren’t as widely available as their traditional counterparts. And remember, these products are usually meant for refinancing rather than new mortgages.

And don’t forget about the extra costs. As with any other form of refinancing, you’ll have to pay closing costs. This could be anywhere between 3% and 6% of the total loan amount. These costs include origination fees, appraisals, title insurance, courier fees, survey fees, transfer taxes, and attorney fees.

The Bottom Line

Although the 40-year mortgage is non-qualified, it can make life more affordable because it can lower your payments by stretching them out over a longer period. But you’ll pay more in interest, take longer to build equity in your home, and it may be harder to find a lender who offers one since they aren’t widely available. Do your research and ensure this product is right for you before you sign up.

Fact checked by Betsy Petrick

When you start a new job that offers benefits, it may include a group life insurance policy, which is a nice perk. Although coverage is affordable and easy to qualify for, life insurance through your employer can often lack key benefits. For example, group life insurance may have limited coverage and is only in effect while you’re employed with the company. As a result, life insurance through your work shouldn’t replace your personal life insurance coverage. 

Key Takeaways

• Life insurance coverage you can buy through your employer is called group life insurance.
• Group life insurance is a term policy that typically renews annually as long as you remain employed with the company.
• Group life insurance may not provide as much coverage as a personal life insurance policy, and if you change jobs, you can’t take it with you.
• Since the life insurance offered through your employer usually provides basic coverage, it’s a good supplement to your personal life insurance coverage.

Shortages and Features Missing in Work Life Insurance

Before signing up for life insurance through your employer, consider that work life insurance policies typically have the following drawbacks:

• Not portable: If you change jobs, you cannot take your current work insurance policy to your new job. Instead, you may need to sign up for a policy with your new employer.
• Limited coverage: When compared to individual policies, your company’s policy may have a significantly lower coverage amount, making it a more effective supplement to your personal life insurance.
• No cash value: Some individual life insurance policies allow you to cash out the policy at the end of its term, particularly if you buy coverage with that option. However, you don’t have the cash-out option with your life insurance policy through your employer.
• Only a term policy: Typically, a group insurance policy renews annually as long as you remain employed with the company. Unlike insurance coverage you can buy on your own, it’s not a permanent policy, meaning it won’t cover you your whole life.
• Not customizable: When you purchase personal insurance coverage, you can tailor the policy to meet your needs by adding riders. For example, you could add critical illness or family benefit riders for more comprehensive coverage.
• Long waiting period before coverage begins: Your employer may not allow you to enroll in a group life insurance policy unless you’ve worked there for a specified period.

Tip

If you’re unsure about the benefits you receive through your job, review your new hire paperwork for details or contact your human resources department.

The Bottom Line

A life insurance policy offered through your employer is a valuable benefit, but it may work best as supplemental insurance rather than your primary life insurance policy. Group life insurance may not provide the coverage limits you need and may not be there for you throughout your life. Instead, you can purchase and personalize a personal life insurance policy to protect your family’s financial future.

Reviewed by David Kindness
Fact checked by Katrina Munichiello

Among the most notable U.S. monopolies in history are Andrew Carnegie’s Steel Company (now U.S. Steel), John D. Rockefeller’s Standard Oil Company, and the American Tobacco Company.

American monopolies date back to colonial administrators who awarded large companies exclusive contracts to help build the New World. From the late 19th to the early 20th century, these companies maintained singular control over the supply of their respective commodities. Without free-market competition, they could keep the prices of steel, oil, and tobacco high.

Key Takeaways

• Until the early 20th century, a single large company could completely control some major U.S. industries, like steel and oil.
• The passage of the Sherman Anti-Trust Act in 1890 eventually saw major U.S. monopolies, such as Standard Oil and American Tobacco, break up.
• In 1982, AT&T was deemed a monopoly, and forced by the U.S. government to spin off most of its assets.
• A type of limited monopoly that still exists worldwide can be found in the form of nationalized major assets in the energy and transportation sectors.

What Are Examples of Early American Monopolies?

Many of the most significant U.S. monopolies emerged during America’s Gilded Age at a time of rapid industrial growth.

One of the leading monopolies was U.S. Steel, which had a market capitalization of $1.4 billion in 1901, equivalent to roughly $51.4 billion today. U.S. Steel was established through the merger of many major steel firms by financier J.P. Morgan. At the time, it was the world’s largest company.

Standard Oil, which controlled a 90% of American oil refineries in the late 1880s, is another notable juggernaut. During the oil boom, Standard Oil acquired several competitors, which allowed it to create a bottleneck in the petroleum industry supply chain. Along with this, the company negotiated favorable contracts with railroads, which further propelled its growth.

Yet another significant monopoly at the time was American Tobacco. In 1890, five major tobacco firms merged to create the monopoly, which allowed it to create economies of scale in a highly lucrative industry. Between 1890 and 1907, the company acquired an estimated 250 firms.

At the time, government regulation of early American monopolies was initially absent. However, the creation of antitrust regulation in the United States, in the form of the 1890 Sherman Antitrust Act, led to the eventual dismantling and restructuring of Standard Oil and American Tobacco by 1911. Like many antitrust cases brought against companies even today, it took several years for these first cases to navigate through the court system.

Unlike Standard Oil and American Tobacco, U.S. Steel was challenged, but not found to be the sole supplier of steel to the U.S. market. However, it continued to possess a considerable market share for many years. In 2022, U.S. Steel was the 27th-largest producer of steel in the world, according to the World Steel Association.

The AT&T Monopoly and Antitrust Regulation

A more recent monopoly to have experienced the same fate as Standard Oil and American Tobacco is the American Telephone and Telegraph Company (AT&T).

Subject to many lawsuits spanning back to the 19th century, AT&T became entangled in one it no longer could escape. In 1974, the U.S. Department of Justice brought suit against the telecommunications giant, citing it had violated antitrust laws. Specifically, AT&T was accused of monopolizing the American telecommunications industry, preventing fair competition.

In 1982, AT&T finally settled with the government. It was required to divest 23 of its local telephone companies, 67% of its assets. The company split into seven regional companies, known as Baby Bells. In return, AT&T was allowed to enter the computer business.

Modern Day Monopolies

A good example of a near-monopoly from very recent history is the De Beers Group, perhaps the best-known diamond mining, production, and retail company in the world. For almost a century, De Beers monopolized the diamond industry. However, market and regulatory factors diminished its market share from approximately 85% in the late 1980s to around 29% in 2022.

As part of the regulatory crackdown on the company, De Beers pleaded guilty to conspiring to fix industrial diamond prices and was ordered to pay $10 million in the 2004 U.S. Department of Justice vs. De Beers case.

Like De Beers, Big Tech companies have faced scrutiny for having monopolies over their respective markets. Google, for instance, has faced antitrust lawsuits that allege that the company uses anticompetitive practices by giving an unfair advantage to its search platform. Similarly, Amazon has been accused of locking out its competitors through tactics that penalize sellers from setting lower prices on different sites.

As recently as 2024, Apple faces allegations of monopolizing the smartphone market in a landmark suit, with regulators claiming that the company engages in anti-competitive behavior.

Note

The U.S. Justice Department accused Apple of monopolizing the smartphone market in March 2024, alleging that it restricts competitor products by making them perform worse on Apple devices.

While several U.S. companies in sectors like technology, consumer products, and food and beverage manufacturing have been accused of being monopolies in the media and some in courts, it rarely has been proven.

What Is the Role of Nationalization?

Most monopolies that exist today do not necessarily dominate an entire global industry. Rather, they control major assets in one country or region. This process is called nationalization, which occurs most often in the energy, transportation, and banking sectors.

The largest such example of a nationalized major asset is Saudi Aramco, also known as the Saudi Arabian Oil Company. Headquartered in Dhahran, Aramco is Saudi Arabia’s state-owned oil and natural gas company.

Founded in 1933 by the Standard Oil Company of California, Aramco was taken over by the Saudi Arabian government in the 1970s. Today, most of the government’s budget revenues come from Aramco’s revenues.

In 2019, Aramco set a record with the world’s largest IPO, raising more than $25 billion from 3 billion shares sold. Continuing its success, Aramco’s market capitalization places it among the largest companies in the world, alongside giants such as Apple and Microsoft.

What Are Some Examples of Monopolies?

AT&T once controlled the telecommunications industry in the United States until divested in 1982. A monopoly that exists today is the United States Postal Service (USPS), which exclusively controls the delivery of mail in the U.S. Congress provided USPS with monopolies to deliver letter mail and access mailboxes to protect its revenues.

Are Natural Gas and Electricity Companies Examples of a Type of Monopoly?

Natural gas, electricity companies, and other utility companies are examples of natural monopolies. They exist as monopolies because the cost to enter the industry is high and new entrants are unable to provide the same services at lower prices and in quantities comparable to the existing firm.

What Are Natural Monopolies and Why Do They Arise?

Natural monopolies exist when the barriers to entry are too great for competitors to enter the industry. Mostly, start-up costs are extraordinarily high and the existing firm has achieved economies of scale, making rivals less able to compete.

What Is a Single-Price Monopoly?

A single-price monopoly is a company that does not practice price discrimination. The firm sells each unit at the same price for all its customers.

The Bottom Line

In many cases, monopolies have gained significant market power in sectors that have high barriers to entry and steep fixed-costs, such as steel, oil, and telecommunications industries.

Monopolies often can help a country or region build or shore up its infrastructure quickly, efficiently, and effectively. But when any company becomes too dominant, leaving little room for competition, service, quality, and consumer wallets can suffer. Historically, antitrust regulation has played a key role in breaking up monopolies, although these instances have proven to be quite rare.