Who is TSM?
TSM seems like a good company well positioned in the semiconductor business. We all know that GM and Ford and iPhone and many others are having hard time to secure chip production on time for their production line. Chips in all smart devices are in short supply. Hence semiconductor producers will increase production to supply high demand. This will increase their revenue and profit margin. This I hope will drive up share prices above market average. If it only increases as the market (S&P500) does then we should buy the market, SPY ETF.
I picked TSM as one of the better options. It is one of Taiwan's biggest companies and delivers chips to clients all over the world. TSMC produces more than 10,000 products for almost 500 clients worldwide. Even giants of semiconductor production, such as Advanced Micro Devices (AMD) have TSM to produce their chips!
In fact, the company produces chips for some of the largest names in the world. Apple accounts for about one-fifth of TSMC's annual revenue and North America is TSMC's largest market. Thus, all auto makers like GM and Ford, and also tech companies are depending on TMS and some others. North America brings in more than 65% of the company's revenue.
TSMC is the archetype of a company that exploits Moore’s Law. This is the observation that transistors halve in size or more accurately, double in performance per area every two years. If we’re nearing the theoretical limits of Moore’s Law, no one bothered to tell Taiwan Semiconductor Manufacturing. The company has everything from 90nm tech to developing 5nm tech. The company hopes to have 3nm fabs ready in 2023, possibly spending a reported $20 billion on the technology.
Their revenue Growth Rate increased from 5% to 25% in 2020. They increase their Operating Income and Free Cash Flow. Current Ratio (above 1.5) and Total Debt to Equity Ratio (below 0.3), are great numbers! In 2020 they increased their long term liabilities 6 fold. This is huge. This capital is invested into the 3nm Fabrication to be ready in 2023. At the same time their current liabilities outrun their long term liabilities. Rapidly growing Enterprise value is due to increased loans taken in 2020. Liabilities are part of the enterprise value since you as a potential buying would have to assume them.
Earnings Before Interests, Taxes, Amortization and Depreciation. went up from 35-45%. And so is the Operating Margin. I expect the Revenue to grow similar to last year or even better due to the shortage.
All Prices in TWD, 27 TWD = 1 USD
TSM
I will be buying two contracts of 16 JULY CALLS, $140 Strike for $12.60
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