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Charlie Chan on TSMC

Daniel Nenni

Staff member
I know Charlie from the TSMC investor meetings in Taipei prior to the pandemic. He would sit up front and fire questions to the TSMC execs. He is a very sharp guy and an expert on TSMC:

Taiwan Semiconductor (NYSE:TSM) shares rose in premarket trading on Monday, as Morgan Stanley upgraded the company, citing several factors, including bigger opportunities from Apple (NASDAQ:AAPL), Intel (NASDAQ:INTC) and Sony (NYSE:SONY).

A team of analysts, led by Charlie Chan, raised their rating to overweight and put a NT780 ($28) price target on the stock, noting that Taiwan Semi is "repricing the value-add of foundry services," adding that it recently had a breakthrough with its enhanced 3 nanometer process and is moving down to 2 nanometer. In addition, the analysts noted Taiwan has a "bigger outsourcing opportunity from Apple, Intel, and Sony than we previously expected" and lastly, its capital expenditure spending could be "significantly reduced in 2024."

Taiwan Semiconductor shares were up slightly more than 1% to $122.54 in premarket trading on Monday.

While there are several positive opportunities for Taiwan Semi ahead, the key risk is a "tech supply chain rebalancing," Morgan Stanley noted, with an inventory correction in smartphones, TVs and consumer PCs having likely already started.

The investment firm noted that Taiwan Semi is investing significant amounts of capital ($140 billion between 2019 and 2023) to extend its lead over rivals, such as Samsung (OTC:SSNLF), with the tech gap having widened over the past year.

"We expect Taiwan semi to have nearly 100% market share in 3nm in 2023," the firm wrote in a note. "Moreover, given cost-savings at the N2 GAA node, TSM's capex intensity should moderate to 35% in 2024, boosting free cash flow and dividend payout. 20% revenue CAGR, driven by further share gains: Our latest industry checks suggest that Intel's CPU outsourcing may exceed 20% in 2024."

The firm continued: "In addition, news of more Apple-designed chips (e.g., modems) and Sony's image sensor outsourcing was not previously in our model. We expect these and other gains to help TSM reach [$100 billion] revenue in 2024, implying a 20% CAGR from 2021."

Taiwan Semi is one of the major holdings of the VanEck Vectors Semiconductor ETF (NASDAQ:SMH), which continues to be a favorite among investors in the early going of 2022.

"We expect Taiwan semi to have nearly 100% market share in 3nm in 2023,"

Is that possible? Should Samsung have at least 5% to 10% market share at 3nm?
I'm so surprised he did not get fired. He said TSMC is too expensive and stock price doubled.
This implies Samsung 3nm GAE MCBFET will not be HVM in 2023 which means schedule missed for another year. Let's see.
Or perhaps that this analyst doesn't consider Samsung 3nm GAA to be "3nm-class"? I've read a lot on people not thinking Samsung's marketing names match reality (compared to TSMC/Intel).

Or perhaps they don't think HVM will be very "high"?