Taiwan Semiconductor Manufacturing is a foundry in the semiconductor industry which engages mainly in the manufacturing, selling, packaging, testing and computer-aided design of integrated circuits and other semiconductor devices and the manufacturing of masks. Co. also engages in the researching, developing, designing, manufacturing and selling of solid state lighting devices and related applications products and systems, and renewable energy and efficiency related technologies and products. Co.'s products include logic semiconductors, mixed-signal/radio frequency semiconductors, CMOS image sensor semiconductors and high voltage semiconductors.
TSM’s moat is dug from scale advantages in the foundry space that no other firms can match. Semiconductor fabrication technologies continually advance, which allows the chip industry to come out with ever-faster chips that are more power efficient, at lower per-unit costs. As the undisputed market share leader, TSMC has more resources to invest in research and development and cutting-edge production equipment to stay at the forefront of chip manufacturing technologies, as well as spread out its fixed costs more efficiently, than its closest competitors.
Taiwan Semiconductor reported strong results in 2014. Revenues increased 46%, while earnings rocketed 72%. Growth should continue in 2015, though at a slower pace than 2014. Year-to-year improvement for 2015 will more than likely be constrained by a strong U.S. dollar, which is hurting end demand across myriad of sectors, including the personal computer, mobile, and tablet segments. Growth over the long term ought to continue to be driven by healthy demand for silicon used in mobile applications. This chip space is competitive but size gives TSM’s size and agility to quickly adjust to customers' production needs will give TSM a competitive edge. In our opinion the stock has room to move higher in the 3 to 5 years ahead.
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Leading market position
Strong R&D capabilities
Patent infringement litigations
Adverse fluctuations in exchange rates
Risk from highly cyclical semiconductor and electronics industries
Robust outlook for the global semiconductors market
Focus on solar and solid state
Wearable and internet of things (IoT) offer robust growth opportunities
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