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U.S. brokerage raises target price on TSMC shares

2018/09/22 17:52:27

Taipei, Sept. 22 (CNA) A U.S.-based brokerage has raised its target price for shares of Taiwan Semiconductor Manufacturing Co. (TSMC), the world's largest contract chipmaker, amid optimism over its status as the sole supplier of processors for Apple's iPhones.

In a research note, the securities house said an increase in orders placed by Advanced Micro Devices Inc. (AMD), Nvidia Inc. and Google were also expected to boost TSMC's shipments and global market share.

The U.S. brokerage upgraded its target price on TSMC shares to NT$289 (US$9.41) from NT$260 and also raised its recommendation for the stock to "overweight" from "neutral."

On Friday, TSMC shares gained 0.58 percent to end at the day's high of NT$261.50 on the Taiwan Stock Exchange, where the weighted index closed up 1.30 percent largely on strong buying in old economy and financial stocks.

Boasting good fundamentals, TSMC has served as an anchor stabilizing the broader market in recent sessions, when Taiwan's stock market faced headwinds from fears of an escalation in trade friction between the United States and China.

The brokerage said TSMC is supplying the A12 processor for Apple Inc.'s latest iPhones to boost the new gadgets' speed and battery life, and Apple shipments of the new phones are expected to strengthen TSMC's sales and profits this year.

TSMC is expected to continue to supply the A13 processor for the next generation iPhones in 2019, which could further benefit the Taiwanese chipmaker, the brokerage said.

The company is also expected to become the sole supplier of chips made on the advanced 7 nanometer process to AMD, a development which could lift the U.S. client's market share against its major rival Intel Corp., the brokerage said.

In addition, TSMC has increased its supply of chips used in artificial intelligence applications to AMD and Google, the brokerage said, and TSMC is expected to ship more chips for AI applications in 2019 to meet rising demand from smartphone brands.

California-based Globalfoundries Inc.'s decision to shelve its 7nm technology development and Intel Inc.'s decision to put off the development of its 10nm process are also expected to reinforce TSMC's lead in the global market, the brokerage added.

TSMC started commercial production of chips on the 7nm process in the first half of the year after the launch of the 10nm process last year.

The company has forecast 7nm chips will account for 10 percent of its total sales in the third quarter and 20 percent in the fourth quarter.

CNA cannot identify the brokerage because media outlets in Taiwan are not allowed to report the names of foreign brokerages when they give price-moving forecasts for specific stocks or the wider market.

(By Jeffrey Wu and Frances Huang)