Shares of Taiwan Semiconductor Manufacturing Company (TSM) fell as much as 4% Monday morning, marking a 3.9% drop by late morning.
The decline comes as TSM faces renewed challenges following its decision to halt shipments to a China-based chip designer after a chip it manufactured was found in a Huawei AI processor, according to sources reported by Reuters.
This decision reflects compliance with longstanding U.S. restrictions on technology sales to Huawei due to national security concerns.
The move to suspend shipments to Sophgo, a Chinese chip company, underscores TSM’s position at the center of intensifying geopolitical tensions over semiconductor technology.
The U.S. government, concerned about potential military applications, has restricted the sale of advanced chips to Chinese companies, aiming to control access to AI-related technology.
CHECK THIS OUT: Apple Adds AI Features to iPhone 16 in iOS 18.1
TSM’s Morris Chang Sees End of Semiconductor Free Trade Amid U.S.-China Tensions
At a recent company event, TSM founder Morris Chang cautioned investors about the impact of these restrictions on TSM’s future growth.
Chang characterized the current environment as TSM’s “most severe challenge yet,” given that global powers are increasingly viewing semiconductor production as strategic turf.
Free trade of semiconductors, particularly the most advanced, has effectively ended. TSMC is now truly a territory all major powers want to secure.”
TSMC Founder, Morris Chang
Despite these concerns, CEO C.C. Wei took a more optimistic stance. Wei shared that TSM’s U.S.-based semiconductor facility in Arizona is “progressing well,” signaling continued expansion efforts outside Taiwan.
He expressed confidence in the company’s ability to maintain its technological edge and global industry leadership.
Financial Resilience Amid Market Pressures
Despite these external challenges, TSM’s financial performance remains robust. The company reported third-quarter revenue of $23.5 billion, a 36% increase year-over-year, while earnings per share surged by 54%.
TSM has projected fourth-quarter revenue of $26.5 billion, which would represent a further 35% growth year-over-year, reflecting ongoing strength in demand, particularly for AI-related processors.
TSM currently produces an estimated 90% of the world’s most advanced processors, positioning it as a leader in the AI semiconductor market.
Analysts have noted that, even at 27 times next year’s projected earnings, TSM’s stock remains attractively priced given its dominant position and the expected continued surge in AI-driven demand.
Strategic Position and Market Outlook
As TSM navigates its role as a critical supplier in the semiconductor industry, the company’s strategic importance to both global tech companies and national governments continues to grow.
While regulatory challenges may complicate its path, TSM’s significant technological advantages and leadership in advanced chip manufacturing place it at the forefront of AI-fueled growth.
Investor sentiment remains mixed as geopolitical factors create uncertainty. TSM’s global expansion and tech advancements position it to thrive amid challenges, solidifying its role as a key semiconductor leader.
Read also: Tesla Tops Profit Forecast, Musk Eyes Major 2024 Growth and Coca-Cola Exceeds Expectations as Price Hikes Offset Weak Demand.
