What happened
Shares of foundry giant and new Warren Buffett holding Taiwan Semiconductor Manufacturing Corporation (TSM 3.22%) were rising today, up as much as 4% before settling in to an above-market 2.8% gain as of 2:38 p.m. EST.
There wasn't much company-specific news today; however, a key executive departure at rival Intel (INTC 2.19%) may indicate Intel's ambitious plans to catch up with TSMC in leading-edge production may have hit a setback. Intel's loss would could be TSMC's gain.
NYSE: TSM
Key Data Points
So what
Last night, Intel announced that Randhir Thakur, the executive who was leading Intel's plan to establish itself as a leading foundry for other semiconductor designers, was leaving the company. In an emailed statement to Bloomberg, Intel said Thakur "has decided to step down from his position to pursue opportunities outside the company."
That's certainly concerning for Intel, which is in the midst of an ambitious plan to build out a rival foundry ecosystem to compete with TSMC on the leading edge of semiconductor production. Until recently, Intel had only manufactured its own chips; however, with TSMC surpassing Intel on leading-edge technology a few years ago and continuing to extend that advantage, new Intel CEO Pat Gelsinger has changed the company's strategy to become a foundry for other companies as well. It's possible the cumulative knowledge TSMC has gained by serving a diverse set of third-party chip design customers played a part in its technological success, so Gelsinger's new strategy makes sense.
However, the strategy is turning out to be much easier said than done. Producing semiconductors on the leading edge is becoming more and more difficult with each node, so catching up won't be easy, from either a financial or technological perspective. Intel's main source of cash, its dominant PC processor business, has fallen off a cliff this year, as the PC market is seeing the largest year-over-year decline in recent history. Meanwhile, Intel's production of its latest data center processor, Sapphire Rapids, has been delayed into next year, even as competitors -- which are TSMC customers -- have introduced their new chips this fall.
Now, with the head of Intel's third-party foundry business departing, uncertainty is only growing.
Of course, this change in leadership doesn't mean Intel will fail in its ambitions. In fact, Intel is up 1.8% today, about in-line with the broader semiconductor index.
Still, the departure clouds Intel's outlook and seems to only reinforce TSMC's leadership. Hence, why TSMC is outpacing both Intel and the broader tech index today after yesterday's pullback.
Now what
Taiwan Semiconductor stock bounced about 10% higher after last week's news that Warren Buffett had taken a large stake in the dominant foundry and key Apple supplier. However, the stock still trades at just 15 times earnings and is down 34% over the past 12 months.
If in fact today's news is an indication, TSMC's lead over rivals Intel and Samsung is widening, not narrowing. It's just another reason to own this wide-moat dividend stock.
