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Taiwan Semiconductor Manufacturing Co Ltd ADR TSM

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Morningstar’s Analysis

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Capital Allocation


TSMC’s Capital Expenditure Hike Shows High Conviction in High-Performance Computing; FVE Maintained

Phelix Lee Equity Analyst

Analyst Note

| Phelix Lee |

We maintain our fair value estimate of TSMC at TWD 760 per share. The upside from a higher five-year revenue CAGR forecast of 14% from 13.7% is largely offset by higher capital expenditures from 2021 to 2023 of USD 100 billion from our previous forecast of USD 80 billion. On the chip shortage, TSMC expects it to persist into most of 2022, but automotive-specific backlogs should ease in third-quarter 2021. We believe TSMC is well-positioned to enjoy favorable pricing as chip supplies won't fulfill demand until second-half 2022 when TSMC and peers’ new facilities ramp up. Overall, we think TSMC remains an attractive buy as it's the main beneficiary of devices and computing systems adopting increasingly intricate semiconductor technologies in the long run. Rumors of Samsung encountering production problems reinforce our view TSMC will continue to widen its lead compared with other foundries, supporting our wide moat rating.

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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 Dec 31, 2020
Fiscal Year End Dec 31, 2021
Stock Type
Employees 56,831