The coronavirus pandemic has increased societal dependence on technology, and the trend seems set to continue for an extended period. Fueling the ongoing evolution of technology are high-performance chips. Semiconductor companies have been ramping up their production to cater to rising demand for these chips. The emergence of 5G, AI and high-end computing are driving demand for advanced chips in Logic as well as Memory.
According to market research firm TrendForce, in the first half of 2020 the demand for these chips was driven by remote working, e-commerce and online education. However, in the second half of the year, the rise in demand was due to U.S. sanctions on Chinese technology provider Huawei. Increased 5G smartphone sales and 5G base-station build-outs have also spurred the demand for chips. The firm predicts that the trend will continue and that foundry sales will hit an all-time high this year at $89.6 billion.
We think companies like Taiwan Semiconductor Manufacturing Company Ltd. (TSM – Get Rating), ASML Holding N.V. (ASML – Get Rating), Texas Instruments Incorporated (TXN – Get Rating), and Broadcom Inc. (AVGO – Get Rating) are well positioned to reap massive benefits from this trend.
TSM is a global leader in the manufacturing and selling of semiconductors and integrated circuits across North America, Europe, Japan, China, and South Korea. The company’s standard segments are communications, industrial, consumer, and computer. TSM also offers customer service, account management, and engineering services.
According to a report, Apple (AAPL), for its Project Titan, has roped in TSM to develop the self-driving chips. News reports suggest that Tesla (TSLA) is also collaborating with TSM on its HW4.0 self-driving chip, which is likely to be ready for mass production by April 2021.
During the third quarter ended September 30, 2020, TSM’s revenue climbed 21.6% year-over-year to NT$356.4 billion. Advanced technologies, or 16-nanometers, generated 61% of total wafer revenue. According to the company’s CFO, 5G smartphones, HPC and IoT-related applications are driving the demand for advanced wafers.
The company’s EPS for the quarter climbed 35.9% to NT$5.30 compared to the same period last year.
Analysts expect TSM’s revenue for the quarter ended December 31, 2020 to be…
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