Andrew Willis: We've been hearing for a while now about a shortage in microchips. Yet since the beginning of the year, we've been watching the falling stock price of the world's largest contract chip manufacturer. Taiwan Semiconductor Manufacturing Company TSM, or TSMC, is in one of the most cyclical businesses out there. The industry swings from shortage to glut and back again as the demand for electronics ebbs and flows. When budgets get tight, people aren't likely to buy that new smartphone, and that's where 40% of TSMC's revenue comes from.
The market sees an inventory correction ahead for TSMC's semiconductor products, but it may have missed a few things. As equity analyst Phelix Lee points out, the wide-moat company is only one of two alongside Samsung that can produce certain forms of 5-nanometer chips. And the cutting-edge stuff that needs high-end mobile data processing from the metaverse to autonomous driving and smart cities is just getting started.
For Morningstar, I'm Andrew Willis.
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