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Taiwan Semiconductor Manufacturing Co Ltd 2330

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Morningstar’s Analysis

Currency in TWD
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TSMC Q3 Profits Beat Our Expectations. Strong Long-Term Outlook Trump Near-Term Supply Chain Woes.

Phelix Lee Equity Analyst

Analyst Note

| Phelix Lee |

We slightly raise our fair value estimate for Taiwan Semiconductor Manufacturing, or TSMC, to TWD 800 per share (USD 143 per ADR) from small increases in 2022-23 revenue, partially offset by incremental capital expenditure from the company’s newly confirmed Japan plant. The stock continues to be undervalued in our view, as we think there is still upside in its capital expenditure budget, a proxy of its future revenue, and blended ASP after customers become receptive to price hikes and making prepayments to secure capacity. We now think the chip shortage will remain for the whole of 2022, as structural growth from the likes of data centers, computing systems, and 5G-related content prevent the company from fully clearing backlogs from industrial applications. Short-term corrections in smartphone and PC shipments are not enough to dampen these trends that TSMC is enjoying, in our view.

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Company Profile

Business Description

Taiwan Semiconductor Manufacturing Company, or TSMC, is the world's largest dedicated chip foundry, with over 58% market share in 2020 per Gartner. TSMC was founded in 1987 as a joint venture of Philips, the government of Taiwan, and private investors. It went public as an ADR in the U.S. in 1997. TSMC's scale and high-quality technology allow the firm to generate solid operating margins, even in the highly competitive foundry business. Furthermore, the shift to the fabless business model has created tailwinds for TSMC. The foundry leader has an illustrious customer base, including Apple and Nvidia, that looks to apply cutting-edge process technologies to its semiconductor designs.

No. 8, Li-Hsin Road 6, Hsinchu Science Park
Hsinchu, 300-78, Taiwan
T +886 35636688
Sector Technology
Industry Semiconductors
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 56,831