Although I think the "picks and shovels" concept is often overplayed
as an investment philosophy, it's hard to argue that it doesn't have a
place in certain industries. If you map the performance of semiconductor
foundry operator Taiwan Semiconductor (NYSE:TSM) (or "TSMC") against the ten largest semiconductor companies (excluding Intel (NASDAQ:INTC)) over the last five years, only Avago (NASDAQ:AVGO), NXP (NASDAQ:NXPI), and Skyworks (NASDAQ:SWKS)
have outperformed TSMC. At a minimum, then, I would argue that makes
TSMC a valid idea for investors to consider when thinking about adding
exposure to that sector.
As an investor who is here to make money,
I find the debates over TSMC to be pretty interesting. Sell-side
analysts do battle every month with what their "sources" claim is going
on with major customers like Qualcomm (NASDAQ:QCOM) and Apple (NASDAQ:AAPL), while likewise speculating as to the timelines and performance characters of next-gen processes at rival fabs like Intel and Samsung.
At
the heart of it all, though, I do have some concerns about the growth
outlook for TSMC. The company has shown some cracks (from a competitive
standpoint) at the 14nm/16nm node that didn't appear at 20nm, 28nm, and
40nm, and Intel and Samsung aren't going to let up. While the company
has proprietary technologies that bulls believe can build/hold share,
the race to 10nm is key to sentiment. Given my concerns about overall
market growth, though, it's hard for me to find a lot of reasons to make
this a core holding today.
Click here for the full article:
Taiwan Semi Running Hard ... But Is The Track A Treadmill?
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