TSM Passes INTC in Market Cap

[Arthur Hanson]

TSM, 162.6B market cap, 29B revenue, EPS 1.99/share

INTC 159.3B market cap, 59B revenue, EPS 2.66/share

TSM is definitely on their game and moving fast. The main question I have is whether TSM which has done development work on Crossbar in the past, will become a power player in the memory game. TSM definitely has all the pieces in place to make this happen if it chooses to and it would give them a counter to Intel's 3dXpoint. Also will they be early in making the jump to electronic/optic computing, which is the future. TSM not only has great management, they can also keep a secret.

 

[Daniel Nenni]

TSM, 162.6B market cap, 29B revenue, EPS 1.99/share

INTC 159.3B market cap, 59B revenue, EPS 2.66/share

TSM is definitely on their game and moving fast

I agree completely.

The TSMC investor call last month confirmed what we have been posting plus a couple of additional positive signs:

1. 5nm will use EUV. TSMC made some significant progress on EUV and expects to start 5nm risk production in first half of 2019.
2. For Q3 2016 revenue TSMC reported 17% quarter to quarter and 22% year to year growth.
3. For Q4 2016 Guidance revenue will be flat. Gross profit margin 50.5% ~ 52.5%, operating profit margin 40% ~ 42%.
4. For 2016 worldwide semiconductor industry (excluding memory) will have 1% growth, foundry market will have 7% growth, and TSMC revenue will have 10% growth.
5. TSMC's revenue in each smartphone sold worldwide will increase to $10 next year, from $9 this year.
6. TSMC intends to encourage customers to enter high performance computing market by carefully managing the profit margin on the 7nm node process.

In my opinion TSMC will not only be the first to 10nm, 7nm, and 5nm, they will also be first to using EUV in production (ahead of Intel) which is a major milestone and offers a significant competitive cost advantage which is key for the semiconductor foundry business. I also believe that the flat guidance for 4Q2016 is highly dependent on Apple. Given the latest Samsung Galaxy 7 debacle and positive signs from the smartphone supply chain I believe Apple and the other android phones (that TSMC dominates) will push TSMC’s Q4 revenues above expectations.

There is significant process news about Intel. At a C-Level semiconductor event last month it was mentioned that Intel has moved their 10nm process to the Intel Israel fab for production even though the yield was only at 80%. Intel generally waits until 90% but they are feeling pressure from TSMC and Samsung who are now in production at 10nm. It was also mentioned that Israel is Intel’s top manufacturing site so the confidence is high that 10nm will in fact ramp quickly. Intel Israel was the first fab to get 22nm and that was a quick ramp. Israel did not get Intel 14nm first and that was a yield ramp catastrophe.

While Intel 10nm offers a density advantage over TSMC 10nm, Intel 10nm will be competing in 2018 with TSMC 7nm which offers a density advantage over Intel 10nm. Cost was also discussed, it is widely reported that TSMC 7nm wafers will cost 18% less than Intel 10nm which is a significant margin for the foundry business.

TSMC and NVIDIA will aggressively pursue the high performance computing market at 7nm. This intimate partnership will give NVIDIA an added competitive advantage in the GPU, HPC, Automotive, and AI markets.

Observations:

1. TSMC will continue to lead the semiconductor manufacturing business for the rest of this decade with double digit growth expectations.
2. The new AMD Zen 14nm chips to be launched in 2H2017 will now be competing with Intel 10nm chips which will not end well for AMD.
3. NVIDIA 10nm and 7nm GPU parts will be competing with AMD 14nm parts moving forward which will also not end well for AMD.
4. The Intel foundry business is not expected to deliver customer 10nm chips until 2019 giving TSMC an even longer lead. Altera is just now sampling 14nm chips and is not expected to deliver 10nm chips until 2019, a year after Xilinx will deliver 7nm chips (Xilinx skipped 10nm to accelerate 7nm). This is bad news for Intel/Altera since in the FPGA business the first to a new process gets majority market share.
5. TSMC customers in mobile and other leading edge process dependent chips will also have a significant advantage (MediaTek, Apple, Xilinx, Broadcom, etc…). Additionally, Qualcomm is confirmed to be back at TSMC for 7nm after using Samsung for 14nm and 10nm so TSMC will have a monopoly on the mobile business moving forward.

Sound reasonable?

 

[Arthur Hanson]

Dan, do you have any views on advanced memory and optic computing by TSM?

 

[Daniel Nenni]

Dan, do you have any views on advanced memory and optic computing by TSM?

I'm in Taiwan this week, i will ask.

 

[lefty]

1. NVIDIA 10nm and 7nm GPU parts will be competing with AMD 14nm parts moving forward which will also not end well for AMD.

In the last quarter AMD had to pay Globalfoundries $335M for an amendment to the wafer agreeement. I'm guessing it's specifically because Globalfoudries are going to be late with their 7nm and they want to use Samsungs 10nm and/or TSMC's 10 and 7nm node for their GPU products (maybe also Zen).

 

[Daniel Nenni]

In the last quarter AMD had to pay Globalfoundries $335M for an amendment to the wafer agreement. I'm guessing it's specifically because Globalfoudries are going to be late with their 7nm and they want to use Samsungs 10nm and/or TSMC's 10 and 7nm node for their GPU products (maybe also Zen).

In my understanding the GPU people will skip 10nm in favor of an accelerated 7nm push. TSMC mentioned recently that 10nm is a mobile focused node (Apple iPhone8), as was 20nm (Apple iPhone6). It was also mentioned that there would be a 7nm HPC variant with NVIDIA's name attached. I have also heard that AMD is working closely with GF on 7nm which is due in 2018. Since Intel, TSMC, and GF are skipping EUV on 7nm I have high hopes that they will deliver based on this graphic:

View attachment 18549

The 2016 Leading Edge Semiconductor Landscape


I did read about the renegotiated AMD/ GF contract but I did not listen to the call so I'm not sure what is really going on with respect to 10nm:

News Release | Investor Relations | AMD

"The five-year amendment further strengthens our strategic manufacturing relationship with GLOBALFOUNDRIES while providing AMD with increased flexibility to build our high-performance product roadmap with additional foundries in the 14nm and 7nm technology nodes," said Dr. Lisa Su, AMD president and CEO. "Our goal is for AMD to have continued access to leading-edge foundry process technologies enabling us to build multiple generations of great products for years to come."

"Make quarterly payments to GF beginning in 2017 based on the volume of certain wafers purchased from another wafer foundry."


This has got to be 14nm? It certainly is not 7nm and 10nm is not mentioned. My understanding is that AMD will use Samsung as additional capacity for 14nm since GF 14nm is copy exact from Samsung.

One more thing to note:

"Grant to West Coast Hitech L.P., a wholly-owned subsidiary of the Mubadala Development Company PJSC, a warrant to purchase 75 million shares of AMD common stock at a purchase price of $5.98 per share. The warrant may be exercised in whole or in part prior to February 29, 2020. The warrant is only exercisable to the extent that Mubadala or its subsidiaries do not beneficially own, either directly or indirectly, an aggregate of more than 19.99 percent of AMD's outstanding capital stock after the exercise."

Mubadala Development Company - Wikipedia


This is the same company that owns GF so I highly doubt that GF is using TSMC 7nm.


D.A.N.

 

[hist78]

TSM, 162.6B market cap, 29B revenue, EPS 1.99/share

INTC 159.3B market cap, 59B revenue, EPS 2.66/share

TSM is definitely on their game and moving fast. The main question I have is whether TSM which has done development work on Crossbar in the past, will become a power player in the memory game. TSM definitely has all the pieces in place to make this happen if it chooses to and it would give them a counter to Intel's 3dXpoint. Also will they be early in making the jump to electronic/optic computing, which is the future. TSM not only has great management, they can also keep a secret.

Hi Arthur,

Are you using intraday number in this comparison? TSMC's market capitalization is definitely approaching what Intel has but it hasn't passed Intel, not yet. But it's very close.

This is the past ten days market capitalization comparison at the closing, based on the number from Yahoo Finance:

[table] style="width: 234px"
<colgroup><col><col><col></colgroup>|-
| style="height: 20px; width: 106px" | Date
| style="width: 64px" | TSMC
| style="width: 66px" | INTC
|-
| style="height: 20px" | Nov. 8, 2016
| 162.58B
| 164.30B
|-
| style="height: 20px" | Nov. 7, 2016
| 162.58B
| 164.40B
|-
| style="height: 20px" | Nov. 4, 2016
| 156.83B
| 159.28B
|-
| style="height: 20px" | Nov. 3, 2016
| 157.03B
| 160.79B
|-
| style="height: 20px" | Nov. 2, 2016
| 157.60B
| 163.97B
|-
| style="height: 20px" | Nov. 1, 2016
| 159.26B
| 163.59B
|-
| style="height: 20px" | Oct. 31, 2016
| 161.29B
| 165.25B
|-
| style="height: 20px" | Oct. 28, 2016
| 159.58B
| 164.63B
|-
| style="height: 20px" | Oct. 27, 2016
| 159.58B
| 164.96B
|-
| style="height: 20px" | Oct. 26, 2016
| 161.86B
| 165.49B
|-
| style="height: 20px" | Oct. 25, 2016
| 163.62B
| 166.34B
|-
| style="height: 20px" | Oct. 24, 2016
| 162.89B
| 167.10B
|-
| style="height: 20px" | Oct. 21, 2016
| 161.18B
| 166.58B
|-
| style="height: 20px" | Oct. 20, 2016
| 161.08B
| 167.90B
|-
[/table]


It's amazing! I can walk to many places that most people heard or knew about Intel but not TSMC.

 

[hist78]

[table] style="width: 520px"
|-
| style="height: 42px; width: 155px" | Company Name
| style="width: 194px" | Market CAP, US$ Billion
| style="width: 172px" | Dow Jones Industrial Companies
|-
| style="height: 22px" | Apple
| align="right" | 600.75
| *
|-
| style="height: 22px" | Microsoft
| align="right" | 483.79
| *
|-
| style="height: 22px" | Amazon
| align="right" | 389.13
|
|-
| style="height: 22px" | Berkshire Hathaway
| align="right" | 372.95
|
|-
| style="height: 22px" | Faceook
| align="right" | 362.17
|
|-
| style="height: 22px" | Exxon Mobil
| align="right" | 361.5
| *
|-
| style="height: 22px" | Johnson & Johnson
| align="right" | 317.4
| *
|-
| style="height: 22px" | General Electric
| align="right" | 259.3
| *
|-
| style="height: 22px" | JPMorgan Chase
| align="right" | 250
| *
|-
| style="height: 22px" | Procter & Gamble
| align="right" | 231.6
| *
|-
| style="height: 22px" | Walmart
| align="right" | 217.66
| *
|-
| style="height: 22px" | Royal Dutch Shell
| align="right" | 214.04
|
|-
| style="height: 22px" | Chevron
| align="right" | 201.7
| *
|-
| style="height: 22px" | Visa
| align="right" | 194.8
| *
|-
| style="height: 22px" | Verizon
| align="right" | 193.5
| *
|-
| style="height: 22px" | Pfizer
| align="right" | 184.3
| *
|-
| style="height: 22px" | Coca-Cola
| align="right" | 183.1
| *
|-
| style="height: 22px" | Toyota
| align="right" | 172.06
|
|-
| style="height: 22px" | Merck
| align="right" | 166.1
| *
|-
| style="height: 22px" | Intel
| align="right" | 164.4
| *
|-
| style="height: 22px" | Oracle
| align="right" | 164.05
|
|-
| style="height: 22px" | TSMC
| align="right" | 162.58
|
|-
| style="height: 22px" | Cisco
| align="right" | 159.63
| *
|-
| style="height: 22px" | Home Depot
| align="right" | 153.52
| *
|-
| style="height: 22px" | Disney
| align="right" | 151.8
| *
|-
| style="height: 22px" | Comcast
| align="right" | 151.7
|
|-
| style="height: 22px" | IBM
| align="right" | 147.53
| *
|-
| style="height: 22px" | UnitedHealth
| align="right" | 135.2
| *
|-
| style="height: 22px" | BP
| align="right" | 111.73
|
|-
| style="height: 22px" | Kraft Heinz
| align="right" | 107.57
|
|-
| style="height: 22px" | 3M
| align="right" | 102.84
| *
|-
| style="height: 22px" | McDonald's
| align="right" | 96.28
| *
|-
| style="height: 22px" | Boeing
| align="right" | 89.96
| *
|-
| style="height: 22px" | United Technologies
| align="right" | 84.9
| *
|-
| style="height: 22px" | Nike
| align="right" | 84.8
| *
|-
| style="height: 22px" | Goldman Sachs
| align="right" | 72.2
| *
|-
| style="height: 22px" | American Express
| align="right" | 61.3
| *
|-
| style="height: 22px" | Du Pont
| align="right" | 60.4
| *
|-
| style="height: 22px" | Dow Chemical
| align="right" | 59.92
|
|-
| style="height: 22px" | Lenovo
| align="right" | 53.88
|
|-
| style="height: 22px" | Caterpillar
| align="right" | 49
| *
|-
| style="height: 22px" | Ford
| align="right" | 46.58
|
|-
| style="height: 22px" | Airbus Group
| align="right" | 41.78
|
|-
| style="height: 22px" | HP Enterprise
| align="right" | 40.5
|
|-
| style="height: 22px" | Target
| align="right" | 39.12
|
|-
| style="height: 22px" | Travelers Companies
| align="right" | 29.9
| *
|-
| style="height: 22px" | HP Inc
| align="right" | 26.76
|
|-
[/table]

As of November 8, 2016

With no product bears its name, TSMC's innovative business model is really making a big difference. To put it into perspective, TSMC's current market capitalization is larger than half of Dow Jones Industrial Companies (15 out of Dow's 30 components).

 

[Arthur Hanson]

hist78, I used the market cap this morning before the open, as of this evening the positions had switched. I'm sure the values will seesaw back and forth for a while. TSM went down today and Intel went up.

 

[lefty]

View attachment 18549

The 2016 Leading Edge Semiconductor Landscape

BTW, I made a graph to illustrate that table more clearly:


Note: I use actual product launch dates, rather than announced "ramp up" dates.