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Taiwan Semiconductor Manufacturing Company Limited Message Board

  • sucker2k2 sucker2k2 Jun 25, 2004 4:25 PM Flag

    TSM and TSEM vs Tawian and Israel

    Another pure-play semiconductor foundary stock, TSEM, located in the war-torn Israel, doesn't have any profits yet. So there is no way to figure out its PEG ratio.

    But, as compared with TSM, TSEM has much better performance than TSM. If you hold both of them for the past two year, TSEM is about break even (0%), TSM has return of -40% (i.e. NEGATIVE 40%).

    From Wall Street point of view, is Tawian in a less favorable position as comparing to Israel? that is the part of today's homework, kids!

    http://finance.yahoo.com/q/bc?s=TSM&t=2y&l=off&z=l&q=l&c=tsem

    http://www.towersemi.com/

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    • Because of the commodity nature of foundry business, Wall Street normally has the high expectation when the good time comes (as it happens now). On May 26, TSM up its Q3 guidance from 5-8% to 8-10% growth. But at that time, the Street already expected Q3 to be 11%. On June 03, Morris Chang, CEO of TSM, said it is not unreasonable for the chip industry to grow 30% this year and "looking pretty strong" for next year. As a matter of fact, nobody needed him to tell us that. The Street already expected the growth of TSM 35% this year, and 19% next year (Morris didn't explain what is "looking pretty strong"). TSM was down more than 4% after Morris made that comments but it is difficult to say TSM down because of his comments or because of the "Green Businessmen" incident effect (China didn't approve the loan appplication from a Taiwanese "green" business, ChiMei, a flat panel manufacturer). On June 11 TSM issued its May updates of 29% revenue jump to $650m, the highest monthly revenue in TSM history, TSM also indicated "strong" revenue growth in the second half of 2004. From this TSM May update, the street figured out TSM has to make at least $654m in this month (June) in order to just meet the Q2 expectation. And "meeting expectation" is not something can excite the Street. After the May update, Goldman Sachs immediately downgraded TSM from "outperform" to "inline". As a matter of fact, the "inline" rating is already with the assumption that TSM will perform better than the chip industry growth average (that is 30% as Morris said). TSM or Morris Chang can say whatever they like, but Street has a clear expectation even before they opened their mouth. The common opinion in the semi industry is: TSM already lost her premium opportunity to extent herself into Mainland China in the past couple of years. TSM is playing the catchup game at this moment, but it is too little and too late. Because of losing market share, TSM has more and more difficulties to meet the Street (growth) expectation. That is why the "good" news keep on coming from TSM, but the "good" news didn't help the stock price at all. Anyway, "high growth" won't worth a single penny if it didn't meet the Street expectation.

      http://tw.stock.yahoo.com/n/hist/IT/2004/05/26/222546.html
      http://tw.stock.yahoo.com/n/hist/IT/2004/06/03/223596.html
      http://tw.stock.yahoo.com/n/hist/IT/2004/06/10/224904.html
      http://biz.yahoo.com/rc/040609/tech_taiwan_tsmc_2.html

      The competition in the foundry business is getting firecer everyday. This is not the specific problem for TSM alone. It is the problem for all the foundry companies. This business has little technology contents, the only barrier to enter this business is capital (lots of money!). The Street doesn't like to give high valuation to a "AM/FM radio and TV" manufacturer just because they are using extreme expansive tools. There are total five pure foundry play stocks in US market: TSM UMC CHRT TSEM and SMI. The comparison between these foundry stocks and the bellwether INTC, Nasdaq index is as below:

      http://finance.yahoo.com/q/bc?s=TSM&t=2y&l=off&z=l&q=l&c=intc,^IXIC

    • Personally I have reservation on foundry industry also, it is really a high tech sweat shop. The PEG probably wouldn't be as high as 2.5. But I think it should be around 1.5. 0.5 is really cheap.

      On the other hand, look at IBM. They developed many new foundry techniques. But does IBM strong in foundry? Apparently not. It is still losing money and cannot compete with TSM. It is a clear indication the it is not that easy to get in in the industry! 1.5 is justified!

    • Please change your sign to RRBT: i.e. Real_real_bad_THUG.

      That's what you are!

    • A good rule to investing is to only buy the first or second company in any business segment as the others are marginial and can get wiped out.

      I own TSM in foundry, INTC in custom chips, MSFT in software, CSCO in networking.

      I see TSM at 20 in 2 years or less as they leverage volume with new technology to gain share. I do not see chip cycle affecting them as much as others like Charter who live off of surplus demand right now.

    • Only two percent increase made these crappy guys jumping around to conclude that China is defeated .... LOL ... This is just a mrror. If two percent increase makes you 100% happy, then two percent decrease can make you equaly 100% miserable. Therefore, I wonder how many of you were ready to jump the cliff a few days ago when this pig dropped over 10%? ...LOL.

    • money wins every time. I could actually make a case that China attacking Taiwan would be good for U.S long term as it would result in complete trade embargo against China and allow U.S. to re-emerge with a stronger manufacturing base as China goods would be frozen out. China too smart to do something this stupid. China's only threat to U.S is economic, not military. That is why we need to enforce WTO rules ASAP and open China's banking system to US Banks and insurance where we will crush them in this service sector.

    • Interesting comparison. I agree with wowgoner that your investment knowledge is indeed deep. However, the graph can be interpreted either way! My interpretation is that the risk of TSM is overated! Taiwan/China relationship should be much better than the situation of Israel. This is why I am willing to take the risk to invest since people will eventually realize that they overated the risk of TSM!

    • Now that's not a bad post Sucker, we need more like that. However, all of the difference is really in May/June, and is mostly because people don't think China can handle itself in a "grown up" manner. I tend to disagree, and believe that China will not have a hard landing, and will realize the futility of their sabre rattling over Taiwan, given the fact that a China/US conflict is in no one's best interest (as the US is committed under the Defense of Taiwan Act) and would be a foregone conclusion anyway. China is sharp enough to realize that they aren't ready for a tussle with the US, someday in the future probably, but not this year.

 
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