TSM Passes Intel in Market Cap

[Arthur Hanson]

TSM is now the leader in the chip space, after slowly gaining on Intel over the last five years. The question is how Intel going to become like IBM, a former shadow of itself set out for a long slow decline in market share and technology? Andy Grove would be spinning in his grave to see what has happened to Intel. The current management has forgotten Andy Grove's rule number one "Only the paranoid survive".

Taiwan's TSMC Tops Intel by Market Value for First Time: Chart - Bloomberg

Taiwan Semiconductor Manufacturing Co. pushed past the market value of Intel Corp. for the first time after a drop in the U.S. chipmaker’s shares. The Taiwanese company has profited from the rising popularity of mobile computing, benefiting customers such as Apple Inc. and Qualcomm Inc. Intel, the largest supplier of microprocessors for personal computers, has struggled with the decline of that business.

 

[Daniel Nenni]

That is really big news! You should also note other 2016 milestones:

TSMC Gross margins rose to 50.1% with an operating margin of 39.9%.

TSMC currently holds a 59% foundry market share followed by GLOBALFOUNDRIES at 11%, UMC at 9%, and SMIC at 6%.

I am forecasting even bigger numbers in 2017, absolutely!

 

[hist78]

TSM is now the leader in the chip space, after slowly gaining on Intel over the last five years. The question is now Intel going to become like IBM, a former shadow of itself set out for a long slow decline in market share and technology? Andy Grove would be spinning in his grave to see what has happened to Intel. The current management has forgotten Andy Grove's rule number one "Only the paranoid survive".

Taiwan's TSMC Tops Intel by Market Value for First Time: Chart - Bloomberg

Taiwan Semiconductor Manufacturing Co. pushed past the market value of Intel Corp. for the first time after a drop in the U.S. chipmaker’s shares. The Taiwanese company has profited from the rising popularity of mobile computing, benefiting customers such as Apple Inc. and Qualcomm Inc. Intel, the largest supplier of microprocessors for personal computers, has struggled with the decline of that business.

At this moment, according to Yahoo Finance, Intel's market cap is still a little bigger than TSMC, but not much ($166.92B vs. $162.17B). It's interesting in several aspects:

1. Before TSMC's incorporation, Intel walked away from the opportunity to be one of of the founding investors at TSMC. It's after several rounds of presentation by Morris Chang. It reminds me Intel walked away from Apple's request to manufacture SoCs for the iPhones even before the world knew there is such thing called "iPhone". The reason? It's because Intel's analysis predicted iPhone's potential would be very limited so the Apple's order would be too small for Intel to deal with!

2. TSMC doesn't have a product under its own name because the fabless model. Yet both TSMC and its foundry customers enjoy 30%, 40%, 50%, or even more gross profit margin. On the other hand, while Intel has a lush >60% gross profit margin for themselves, Intel's major customers, such as Leveno, HP, DELL, Asus, and Acer, are struggling to maintain a less than 20% or single digit gross profit margin. They are not much better than many grocery chains! Can Intel find a way to let both Intel and Intel's customers make meaningful profit? If not, then Intel's future is questionable.

3. In the past ten years, TSMC grew its revenue by focusing on the foundry business and didn't do much in M&A. On the other hand, Intel has made several major M&A in the same period of time. Intel's acquisition list is long and large, such as: $884M (Wind River), $1.4B (Infineon Mobile division), $7.68B (McAfee), $100M (Basis Science), $650M (LSI - Axxia Networking), $16.7B (Altera), $175M (Recon Instruments), $175M (Replay Technologies), $350M (Nervana), $400M (Movidius), $250M (Soft Machines), $15.3B (Mobileye, pending). Did Intel make meaningful M&A based on reasonable valuation and boost their revenue significantly? To me, this is really debatable.

 

[kingmouf]

In the past ten years, TSMC grew its revenue by focusing on the foundry business and didn't do much in M&A. On the other hand, Intel has made several major M&A in the same period of time. Intel's acquisition list is long and large, such as: $884M (Wind River), $1.4B (Infineon Mobile division), $7.68B (McAfee), $100M (Basis Science), $650M (LSI - Axxia Networking), $16.7B (Altera), $175M (Recon Instruments), $175M (Replay Technologies), $350M (Nervana), $400M (Movidius), $250M (Soft Machines), $15.3B (Mobileye, pending). Did Intel make meaningful M&A based on reasonable valuation and boost their revenue significantly? To me, this is really debatable.

I think that the problem is not in the acquisitions per se, but on the missing vision and long term strategy that there should be. Intel bought for a whole lot of money McAfee, but I think that it never had a real strategy about what to do with what it got. The result is that I believe Intel didnt make anything significant (as in almost 8 billion significant!) from the acquisition and if I am not mistaken it recently sold most of what it got. In the same way, Intel got the mobile business from Infineon in order to put modems and stuff into its mobile SoCs, now it is out of the business and only plans to sell separate modem chips. I am not sure this is a winning strategy when everyone else is getting design wins exactly because of the integration. Intel is lucky now with the Apple situation, but I am not really sure that this is enough or that this is going to last for too long. Same things apply to other acquisitions.

 

[hist78]

I think that the problem is not in the acquisitions per se, but on the missing vision and long term strategy that there should be. Intel bought for a whole lot of money McAfee, but I think that it never had a real strategy about what to do with what it got. The result is that I believe Intel didnt make anything significant (as in almost 8 billion significant!) from the acquisition and if I am not mistaken it recently sold most of what it got. In the same way, Intel got the mobile business from Infineon in order to put modems and stuff into its mobile SoCs, now it is out of the business and only plans to sell separate modem chips. I am not sure this is a winning strategy when everyone else is getting design wins exactly because of the integration. Intel is lucky now with the Apple situation, but I am not really sure that this is enough or that this is going to last for too long. Same things apply to other acquisitions.

Agree with you 100%. I still don't understand why Intel spent $7.68B to buy McAfee at all. Even for Intel's standard, this is not a small morning coffee money. $7.68B could have helped Intel in advancing R&D and manufacturing capability.

 

[Arthur Hanson]

Agree with you 100%. I still don't understand why Intel spent $7.68B to buy McAfee at all. Even for Intel's standard, this is not a small morning coffee money. $7.68B could have helped Intel in advancing R&D and manufacturing capability.

Intel seems to have lost focus and needs to get it back. In the meantime TSM has gained focus by selling off their lighting and solar divisions in past years.