Taiwan Semiconductor Manufacturing Corporation (NYSE:TSM), commonly known as TSMC, is listed both in Taiwan Stock Exchange and NYSE as an ADR (American Depository Receipt). It is the largest semiconductor foundry in the world, commanding 56% of the world’s market share, with Samsung taking in 18% at the distant 2nd place.
Historically, TSMC made about 25% Return on Invested Capital (ROIC). It had announced earlier this year that it will be investing $100 billion over the next 3 years to build more manufacturing plants to meet the chip demand. With its technological advancement, by some industry experts’ estimation, it is 3 generations ahead of Intel, thus TSMC should be able to maintain its ROIC from its additional $100 billion investment.
It is widely acknowledged that the semiconductor industry is riding on a secular tailwind, driven by technological breakthrough in 5G, Electric Vehicle (EV), Artificial Intelligence (AI) and Machine Learning, and the common factor that make all these possible is more powerful microchips.
TSMC Daily dated 1 Nov 2021
Attached is the daily chart of TSMC over the past 10 years. Since recovery from the Great Financial Crisis, the 250-days Moving Average had been supporting the bull run that the stock had been in. Once a year, with the exception of 2017, we seen its stock price correcting from its all-time high at the point in time back down to or slightly below the 250-days Moving Average. Many of these corrections measured about 20-30% from peak to trough. After 6 months of price consolidation, TSMC’s share price had corrected about 25% from its high of $142.20 clocked on 16 Feb 2021. Investors interested to invest in this market leader and ride on the growth of the semicon industry, can consider TSMC for this once a year pilgrimage it make towards the 250 days Moving Average.
As usual, this writeup was broadcast to Clients on 1 Nov 2021 but posted here only on 8 Nov 2021.
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Chart source: tradingview
Image source: www.caixinglobal.com