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Sole A10 Fabricator TSMC Benefits from iPhone Demand and Broader Tech Rally

Sole A10 Fabricator TSMC Benefits from iPhone Demand and Broader Tech Rally

Shares of Taiwan Semiconductor Manufacturing Company (TSMC), the sole supplier of the A10 processor used in Apple’s latest iPhones, have risen to their highest price on record. The company is attractive to investors due to continued strong demand for Apple’s new iPhone 7 lineup, and a broader rally in technology stocks during the past year.

Taiwan Semiconductor Manufacturing Co Ltd Chairman Chang attends an investors' conference in Taipei

Bloomberg:

While the company has benefited from a broader rally in technology companies this year that’s seen rivals including Intel Corp. reach multi-year highs, TSMC is luring investors with record profit as demand for Apple Inc.’s new iPhones fuels orders for its processor chips. With Samsung Electronics Co. faltering after the scrapping of its Note 7 device, Value Investment Principals Ltd. and Manulife Asset Management Co. say the stock has room to rise further.

The stock of the contract chipmaker, the world’s largest, has risen 32%, and the $156 billion company now accounts for 16% of Taiwan’s entire equity market value, which is the biggest proportion according to data stretching back 13 years. Bloomberg reports none of the 33 analysts who cover the firm recommend selling the shares.

TSMC has reportedly secured exclusive manufacturing duties for Apple’s next generation “A11” processor, which is expected to power Apple’s 2017 10th Anniversary iPhone. That contract, and Samsung’s Galaxy Note 7 fiasco, have led market watchers to predict the stock has nowhere to go but up.

“Samsung’s issues and the perceived benefit for Apple is surely creating some optimism,” said Sandy Mehta, chief executive officer of Value Investment. “TSMC is the best in class. Valuations are not very high for TSMC, and rising estimates have led to investor optimism. The shares could still have upside.”

Analyst expect TSMC’s income to increase by 30% this quarter. Profit is said to have climbed 28% in the previous quarter, from a year earlier.

Perhaps now TSMC can afford to commission a new logo, to replace the 1960s-style logo they currently fly.

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