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U.S. tech firms and their reliance on Taiwan 

Taiwanese chipmakers are forward of their worldwide rivals and it is going to be powerful for U.S. tech firms to cut back their reliance on Taiwan, stated Sebastian Hou from CLSA.

Tech companies like Apple, Amazon, Google in addition to Qualcomm, NVIDIA and AMD rely closely on Taiwanese contract producers to supply as much as 90% of their chips, in line with Hou, who’s managing director and head of tech analysis on the brokerage agency.

“It will be a difficult and lengthy journey for them to diversify away, and fascinated by how lengthy it takes for the chip growth and cooperation — it may take some time,” he stated Monday on CNBC’s “Avenue Indicators Asia.

Semiconductors are utilized in all the things, from smartphones and computer systems to automobiles in addition to residence home equipment.

Whereas the USA dominates the worldwide semiconductor market share by income, Asia is the manufacturing powerhouse, in line with a latest report from Financial institution of America. Asian international locations produce greater than 70% of world semiconductors — Taiwan and South Korea, specifically, have established unmatched positions in high-end chip manufacturing capability, the report stated.

A person walks previous TSMC’s brand on the firm’s headquarters in Hsinchu, Taiwan. TSMC is the world’s largest semiconductor foundry.

Sam Yeh | AFP | Getty Photos

Upside for Taiwan chipmakers

Taiwan Semiconductor Manufacturing Firm (TSMC), the world’s largest chip foundry, is up greater than 13% year-to-date. Its rival United Microelectronics Corp — seen as a distant second to TSMC in Taiwan’s contract chip manufacturing area — is up about 16% in the identical interval.

CLSA has a “purchase” score on TSMC and a value goal of 825 New Taiwan {dollars} ($28.97) — that is a 35% upside from Friday’s shut.

The brokerage has an “outperform” score on UMC and a value goal of 62 New Taiwan ($2.18), a 16.76% upside from final week’s shut.

Hou defined that between the 2 shares, TSMC has a better threat — because of a wider unfold between its goal value and present share value — nevertheless it provides larger returns. He added that the worth goal is “extremely achievable” for the reason that firm is predicted to take care of know-how management over the following 5 years and prospects are set to rely closely on it.

China’s SMIC lagging

A report from market analysis agency TrendForce ranked China’s Semiconductor Manufacturing Worldwide Company (SMIC) fifth by income among the many world’s high 10 foundries in February, primarily based on estimated first quarter numbers.

SMIC is China’s largest and most necessary chipmaker — it’s seen as key to Beijing’s plans for self-sufficiency within the semiconductor area, following tensions with Washington. Final December, the U.S. blacklisted SMIC, and restricted American firms from exporting know-how to the agency.

Hou defined that it’s nearly unattainable for SMIC to meet up with TSMC and different chipmakers in gentle of the U.S. sanctions.

The know-how hole between SMIC and TSMC is at the moment about six years, he stated. If SMIC can not purchase the know-how it must bolster its high-end chip manufacturing capability, it would fall behind even additional, Hou stated.

“Which implies, it not solely can not catch up, however the hole will additional be widened,” Hou stated, including the hole might prolong to between seven to 9 years.

A report final month from Reuters stated the U.S. authorities has been sluggish to approve licenses for American companies to promote chipmaking gear to SMIC.

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