How much do you consider Taiwanese tension with Ccp? If TSM makes up a significant chunk of portfolio, would you hedge it with INTC in case tensions exceed any expectations?
I think its a really important issue. The problem for me is that INTC Is a nice hedge but probably not a perfect one. If China invades Taiwan for example - the US is likely to go to war or something very drastic.
I don't really know how to "hedge it" and I am unsure if Intel is the best way. It's a pretty complex thought process. And INTC exceeding expectations just doesn't seem likely since it seems like 2022 will be the full outsourcing year according to rumors by Digitimes and others.
Thanks for the great article. Just a small note, DCE in company presentations stand for Digital Consumer Electronics rather than Datacenter Comms.
In Q4 2020, 49% of TSM revenue came from advance nodes (7 & 5 nm). Now, in the next couple of years this number is likely to be close to 70-80%. First, this gives a margin of safety that the company can maintain its guided 50% margins. Second, it will enable massive revenue growth as ASP will grow with higher advance node mix.
I personally believe if utilization rates stay as high and forex is favorable, gross margins will likely be 52%-54%. I also think that 10-15% revenue CAGR is conservative guidance, I think they will deliver 15-20% CAGR until 2025 (if not more). Hence, I assume earnings of ~$10 per ADS in 2025, and at a conservative 20 p/e gives $200 for TSM stock in 2025 earnings. I do however take my model as conservative given growing ASP at advance nodes and how fast revenue for the company can grow.
Thank you! The DCE was a mistake - am correcting it right now. Sorry!
I think the question about the margin of safety re: 50% gross margin is hard - as newer nodes will likely have lower margin - but they may raise price against that.
Obviously faster growth is great - I do believe that 15% is likely on the conservative side of the revenue perspective. Thank you for this thoughtful comment!
You've mentioned auto as a driver of semi demand in coming years (higher silicon content per car etc). Any insights into Indie Semi which is being taken public by a SPAC ($THBR)? It looks pretty early stage but they boast a nice backlog. Curious if you have any thoughts! Cheers
That is one of the sketchiest companies ever. I cannot find a single product sheet or example of their product in the wild. I’m sure it’s out there. If you’re looking for the SPAC angle please defer to the ACEV post by Dylan @ semi analysis. Of the two semi spacs that seems much more legit....
Granted they are spacs and I am doubting both of their quality metrics.
Yeah that makes sense, it wasn't clear to me that Indie has any discernible design edges. Thanks for your thoughts! I'll take a look at the ACEV stuff 🙌
How much do you consider Taiwanese tension with Ccp? If TSM makes up a significant chunk of portfolio, would you hedge it with INTC in case tensions exceed any expectations?
I think its a really important issue. The problem for me is that INTC Is a nice hedge but probably not a perfect one. If China invades Taiwan for example - the US is likely to go to war or something very drastic.
I don't really know how to "hedge it" and I am unsure if Intel is the best way. It's a pretty complex thought process. And INTC exceeding expectations just doesn't seem likely since it seems like 2022 will be the full outsourcing year according to rumors by Digitimes and others.
Thanks for the great article. Just a small note, DCE in company presentations stand for Digital Consumer Electronics rather than Datacenter Comms.
In Q4 2020, 49% of TSM revenue came from advance nodes (7 & 5 nm). Now, in the next couple of years this number is likely to be close to 70-80%. First, this gives a margin of safety that the company can maintain its guided 50% margins. Second, it will enable massive revenue growth as ASP will grow with higher advance node mix.
I personally believe if utilization rates stay as high and forex is favorable, gross margins will likely be 52%-54%. I also think that 10-15% revenue CAGR is conservative guidance, I think they will deliver 15-20% CAGR until 2025 (if not more). Hence, I assume earnings of ~$10 per ADS in 2025, and at a conservative 20 p/e gives $200 for TSM stock in 2025 earnings. I do however take my model as conservative given growing ASP at advance nodes and how fast revenue for the company can grow.
Thank you! The DCE was a mistake - am correcting it right now. Sorry!
I think the question about the margin of safety re: 50% gross margin is hard - as newer nodes will likely have lower margin - but they may raise price against that.
Obviously faster growth is great - I do believe that 15% is likely on the conservative side of the revenue perspective. Thank you for this thoughtful comment!
You've mentioned auto as a driver of semi demand in coming years (higher silicon content per car etc). Any insights into Indie Semi which is being taken public by a SPAC ($THBR)? It looks pretty early stage but they boast a nice backlog. Curious if you have any thoughts! Cheers
That is one of the sketchiest companies ever. I cannot find a single product sheet or example of their product in the wild. I’m sure it’s out there. If you’re looking for the SPAC angle please defer to the ACEV post by Dylan @ semi analysis. Of the two semi spacs that seems much more legit....
Granted they are spacs and I am doubting both of their quality metrics.
Yeah that makes sense, it wasn't clear to me that Indie has any discernible design edges. Thanks for your thoughts! I'll take a look at the ACEV stuff 🙌