Taiwan Semiconductor: Visibility May Be Limited In The Near-Term, But Long-Term Growth Outlook Is Favorable

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• TSMC delivered a strong Q4 2019 thanks to its success in ramping up production for its industry leading 7nm manufacturing process.
• The company may face revenue decline in Q2 2020 due to decline in smartphone sales globally.
• However, TSMC should continue to benefit from growth in the semiconductor industry in the long term.

seekingalpha.com, Apr. 07, 2020 – 

Investment Thesis

Taiwan Semiconductor Manufacturing Co. Ltd. ("TSMC") (TSM) delivered an impressive Q4 2019 thanks to strong demand for its higher margin 7nm manufacturing process. The company will likely face revenue decline in Q2 2020 due to weak smartphone sales caused by the outbreak of COVID-19. However, we think its long-term growth outlook remains intact as semiconductor content is expected to increase in automotive, smartphone and many IoT applications. The company currently pays a 3.3%-yielding dividend and has the potential to deliver a total return of 26%. While visibility is limited in the near-term and things may get worse before it gets better, we think this is a stock worth considering for investors with a long-term investment horizon as it offers investors both the opportunity of capital appreciation and dividend growth.

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