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$10.25 -0.35 (-3.30%)
7/3/2008 1:00 PM

Taiwan Semiconductor Manufacturing Co. Ltd. (ADR (TSM)

CAPS Rating:
*****

The Company manufactures semiconductors using its advanced manufacturing processes for the customers based on its own or third parties' proprietary integrated circuit designs.

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Avatar sandvig (99.38) Submitted: 5/18/07 9:13 AM : Outperform Start Price: $10.26 TSM Score: 16.82

Summam scrutemur - Let's look at the bottom line.

Their annual revenue is 9.10B and they generate 5.81B in operating cash. It reflects their high margins and no debt. Their market share is expanding. TI just announced that they are sending more work to TSM.

They have a very low PEG ratio of .78.

This seems too easy, which always makes me wonder what I am missing.

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Avatar none0such (94.63) Submitted: 5/13/08 3:43 AM

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I think what people miss about this company is that TSM defines contract chip manufacturing as a service industry: they exist to help their clients make more money through their expertise than if the clients were to go it alone or with another contract manufacturer. People usually equate this industry with high capital expenditures and diminishing margins for a commodity product that invites competition from cheaper suppliers. This may have been true for TSM in the past and is still true for a majority of tech companies that are abandoning the in-house fab model or have chosen to not even adopt it. However, the management of TSM realized years ago that what was needed to differentiate their "brand", and stay in business, was consistency, speed and quality: their semiconductor yields are higher because their quality is better; their time in getting a client's product to market is faster because of their fab management. This allows them to charge a justifiable premium for their service.

With the next generation of chip manufacturing off-line (commercial grade light source missing) I believe that TSM and other major players will benefit from the challenge of finding creative, proprietary ways to manufacture new chip designs for a variety of applications.

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