U.S. brokerage expects TSMC shares to top NT$200

A U.S.-based brokerage has predicted that shares of Taiwan Semiconductor Manufacturing Co. (TSMC, ???), the world's largest contract chip maker, will move above NT$200 (US$6.35) because of its advantage in high-end technology development.

In a research note released Friday, the brokerage said TSMC will likely begin mass production of chips using the sophisticated seven nanometer process in the fourth quarter of 2017, ahead of the first quarter of 2018 as was previously scheduled.

The faster-than-expected progress in developing the 7nm process will put TSMC in a dominant position in the technology and help it secure more orders, said the brokerage, which raised its target price for the stock to NT$205 from NT$178, and maintained an "outperform" recommendation.

Under Taiwanese regulations, CNA cannot report the names of foreign brokerages when they give price forecasts for specific stocks.

TSMC shares closed up 0.27 percent to close at the day's high of NT$188.00 on the Taiwan Stock Exchange on Friday, when the weighted index slid 0.20 percent because of concerns that an interest rate hike by the U.S. Federal Reserve is still in the cards.

The brokerage said that after TSMC kicks off commercial production of the 7nm process, many of its customers who currently order chips using TSMC's 16nm process are expected to move to the more advanced technology.

TSMC launched commercial production of the 16nm process last year and is scheduled to begin mass production of the 10nm process by the end of this year.

Qualcomm Inc., which recently shifted its orders for high-end smartphone chip production from TSMC to South Korea's Samsung Electronics Co., could return to TSMC to place orders for chips using the 7nm process, the brokerage said.

In addition, TSMC is expected to dominate the global 7nm market in 2018, which increases the chances it will secure all of the orders placed by Apple Inc. for new iPhone models scheduled to be unveiled that year.

The brokerage said the 7nm process is expected to make up about 4 percent of TSMC's earnings per share in 2018.

Beyond the 7nm process, TSMC has devoted efforts to developing even more advanced 5nm and 3nm processes, Mark Liu (???), president and co-CEO of the chip maker, said in September.

On Friday, TSMC reported a record quarterly high of NT$260.41 billion in consolidated sales for the third quarter of 2016, up 17.4 percent from the second quarter.

The third-quarter sales also beat the company's earlier guidance of between NT$254 billion and NT$257 billion in sales for the quarter.

The sales report was released after Taiwan's stock market closed, but investors seemed to have anticipated the strong results.

Although foreign institutional investors sold a net NT$1.67 billion in shares in Taiwan on Friday, they were net buyers of 3.58 million TSMC shares during the same session.

TSMC has scheduled an investor conference for Oct. 13 to release its full third quarter results and give guidance for the fourth quarter.

Source: Focus Taiwan News Channel