If there are any advantages to scale in the world of semiconductor fabrication, they should fall to Taiwan Semiconductor
Like rival United Microelectronics
Looking at other performance metrics, the company had very high capacity utilization this quarter (96%), and it expects to be running at 100% next quarter. Looking at higher-tech products, United Microelectronics had a slight advantage this quarter on 90nm chips, as their 14% of sales exceeded Taiwan Semi's 10%. Looking at profitability, Taiwan Semi saw operating profit fall more than 4% and net income fall about 12% for this quarter, though both numbers were up strongly from the second quarter.
As what amounts to an original equipment manufacturer (OEM), the company is beholden to its customers for growth. While the roster of customers includes strong players like Altera
Still, I've got to believe that the semiconductor space is going to recover at some point, and Taiwan Semiconductor should recover along with it. There's always the danger that rivals will go loco with reckless capacity additions, but I'm not sure that the markets are in an especially keen mood to underwrite a lot of financing for new fabricators. I know firsthand just how dangerous it can be to utter the words, "It can't get any worse." But for those who have patience or believe that the odds favor an improving semiconductor outlook, Taiwan Semiconductor could be an appealing idea.
Full-length Foolishness on semiconductors:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). NVIDIA is a Motley Fool Stock Advisorrecommendation. The Fool has a disclosure policy.