TSMC shares under pressure but fundamentals still sound: Analysts

Taipei, May 11 (CNA) Shares of contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) came under pressure Monday, as selling of the stock was triggered by a report that Apple Inc. is looking to shift some orders from the Taiwanese company to Intel Corp., dealers said.

Faced with downside pressure soon after the local main board opened Monday, TSMC shares dropped 2.40 percent to NT$2,235.00 (US$71.18) on the Taiwan Stock Exchange.

Despite the losses, TSMC is expected to continue to benefit from sound fundamentals, as it maintains a lead over its peers in high-end process development, analysts said.

"The selling was a knee-jerk reaction to an Intel-Apple report over the weekend," Mega International Investment Services analyst Alex Huang (黃國偉) said, referring to a Wall Street Journal report Friday that Apple and Intel had reached a preliminary agreement for the latter to manufacture some chips for Apple devices.

"As TSMC had been leading a significant rebound of the semiconductor industry over the past month, investors simply seized on the Intel lead to lock in their gains," Huang said. "But today's losses were minor compared with TSMC's previous gains, as many investors remain upbeat about its sound fundamentals during the current AI boom."

Prior to Monday, TSMC shares, which account for over 40 percent of total market value, had soared 31.25 percent since March 31, leading the Taiex to surge 31.15 percent.

"TSMC dominates the high-end chip market worldwide, enjoying strong pricing power, and its buyers have to accept the prices it asks for," Huang said. "In the short term, TSMC's status will not be affected."

He said it was no surprise that Apple wanted to contract a second chip supplier.

Intel reported a 90 percent yield in its trial run of the 14A process, equivalent to TSMC's 2 nanometer process, "but that was just a trial run," Huang said. "Meanwhile, TSMC has started mass production of the 2nm process, and demand has been robust."

Chairman of President Capital Management Co. Li Fang-kuo (黎方國) told CNA that Apple's reported agreement with Intel was not due to problems with TSMC's technology, but because of strong demand from AI customers such as Nvidia Corp., which has tightened TSMC's production capacity.

In the long term, other TSMC clients may follow Apple and seek a second supplier, Huang said, urging investors to stay alert to such developments.

Although TSMC shares fell Monday to below NT$2,272 -- the nearest technical support and the five-day moving average -- it was just a technical hiccup, according to Huang.

"Even if the stock falls below the support around the 20-day moving average of NT$2,152, it would take off again after two to four weeks of consolidation at most," Huang said.