Posted on: April 13, 2021 Posted by: Betty Lee Comments: 0

Taiwanese chipmakers are forward of their worldwide rivals and it will likely be robust for U.S. tech firms to scale back their reliance on Taiwan, mentioned Sebastian Hou from CLSA.

Tech corporations 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 keeping with Hou, who’s managing director and head of tech analysis on the brokerage agency.

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

Semiconductors are utilized in every thing, from smartphones and computer systems to automobiles in addition to dwelling home equipment.

Whereas the US dominates the worldwide semiconductor market share by income, Asia is the manufacturing powerhouse, in keeping with a latest report from Financial institution of America. Asian nations produce greater than 70% of worldwide semiconductors — Taiwan and South Korea, specifically, have established unequalled positions in high-end chip manufacturing capability, the report mentioned.

A person walks previous TSMC’s emblem 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” ranking 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” ranking 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 danger — because of a wider unfold between its goal value and present share value — nevertheless it affords higher returns. He added that the worth goal is “extremely achievable” for the reason that firm is anticipated to take care of expertise management over the subsequent 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, based mostly on estimated first quarter numbers.

SMIC is China’s largest and most essential 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 expertise 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 expertise hole between SMIC and TSMC is at present about six years, he mentioned. If SMIC can’t purchase the expertise it must bolster its high-end chip manufacturing capability, it can fall behind even additional, Hou mentioned.

“Which suggests, it not solely can’t catch up, however the hole will additional be widened,” Hou mentioned, including the hole could lengthen to between seven to 9 years.

A report final month from Reuters mentioned the U.S. authorities has been gradual to approve licenses for American corporations to promote chipmaking gear to SMIC.

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