Chip Somodevilla
Berkshire Hathaway recently announced a stake in Taiwan Semiconductor (NYSE: TSM), along with Qualcomm (NASDAQ: QCOM) cut from China Semiconductor Manufacturing International Corporation, both have been seen as “good” for the semiconductor industry.
However, according to Fubon Research the The chip sector is not out of the woods yet.
Analyst Sherman Shang noted that the cycle could slow down this quarter or the coming quarter as inventory days start to dwindle, but Shang isn’t sure if the recovery looks like a recent boom.
“The gradual recovery going into next season will depend on the recovery of final demand, which was not seen based on our checks,” Shang wrote to clients.
However, valuations are now attractive, and Shang says that Taiwan Semiconductor’s (TSM) valuation has been “downgraded significantly” in the past six months due to political threats, and the expectation is that “a re-rating should be done.” happening in a short time. “
Earlier this week, Berkshire Hathaway (NYSE: BRK.B) (NYSE: BRK.A), led by the famous investor, Warren Buffett, announced a 60M stake in Taiwan Semiconductor (TSM). Buffett’s strong endorsement of Taiwan Semi (TSM) led to a sharp rally, as well as the entire chip sector.
Shang added that the higher price tag, which stands at $4.1B, is a sign of “decreasing” political risk in the region, especially after the recent meeting between President Joe Biden and Chinese Premier Xi Jinping in which both men expressed interest. regular communication.
“In terms of political risk, Mr. Biden’s meeting last week’s mid-term results show that he does not want more conflict with China but there will be competition,” Shang wrote. “Therefore, we believe that the political risk will begin to decrease and lead to a return to Taiwan’s semiconductor supply chain.”
Mr Biden also said during the three-hour meeting that the US One China policy has not changed, and the US is not looking for a conflict with the world’s most populous country.
In addition to the big news from Buffett and Taiwan Semiconductor (TSM), Shang also said that Qualcomm’s (QCOM) cut from SMIC could lead other chip companies to follow suit, ordering the China-based foundry “for internal purposes only.”
“We think this market development will create an environment with less price competition,” Shang added.
Last week, Taiwan Semiconductor (TSM) said its October sales rose 56% year over year.
