TSM Stock: Why You Should Still Go Long On Taiwan Semiconductor

May 27, 2020
motek 1The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

Summary

  • The new sanctions against Huawei means Taiwan Semiconductor was forced to stopped taking new foundry orders from it.
  • This is a near-term headwind. Huawei is the no. 2 largest foundry customer of Taiwan Semiconductor. Huawei accounts for 15% to 20% of Taiwan Semiconductor’s revenue.
  • TSM is still a buy because other Chinese phone vendors like Xiaomi, Oppo, and Lenovo can eventually make up for the lost business from Huawei.
  • • TSM also touts lower valuation ratios than its foundry customers Advanced Micro Devices and Nvidia. This is just wrong because TSM operates on a higher net income margin.
  • Taiwan Semiconductor boasts an excellent balance sheet. Its total cash is $18.86 billion while its total debt is only $7.3 billion.

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