07/23/2024
It is so important to know the facts before you shoot from the hip.
rump Needs to Understand These 4 Numbers About Taiwan Semiconductor -- Barrons.com
July 22, 2024
06:57 AM ETPublished July 22, 2024 06:57 AM Eastern TimeDow Jones Newswires
Al Root
Tech stocks took it on the chin last week. Former President Trump's comments about Taiwan might have been the spark that lit the fire.
Trump didn't sound fully committed to protecting the island, saying it could pay for defense and that it took away U.S. jobs.
China's position about Taiwan is relatively clear. It has vowed to "reunify" the island that sits about 100 million off its mainland coast and has refused to rule out using military force to take control. The U.S. doesn't have a formal alliance with the East Asian country but sold it hundreds of millions of dollars worth of weapons last year.
Ambivalence toward Taiwan might not be the best foreign policy for America. Trump may want to consider a few numbers to help understand just how important Taiwan Semiconductor has become to the U.S. and the global economy.
$700 Billion
The Nasdaq Composite dropped 2.8% Wednesday after Trump's comments appeared in a Bloomberg Businessweek interview.
The drop wiped out some $700 billion in market value from large chip stocks, including Taiwan Semi, and the Magnificent Seven -- shares of Apple, Amazon.com, Alphabet, Microsoft, Nvidia, Tesla, and Meta Platforms.
It is a sign that the markets see Taiwan Semi as something more than just a chip maker. The company is a key supplier of key components to the largest, most important companies in America.
92%
Taiwan Semi makes 92% of the world's advanced semiconductors, with transistor and components smaller than 10 nanometers, according to the Semiconductor Industry Association. Korea make the other 8%.
The U.S. wants to make advanced chips in this country again. But it will take a while. The goal is to have 20% of the advanced chips used made in the country by 2030.
33%
All those chips are made for semiconductor companies that operate without their own manufacturing. Taiwan Semi is a huge supplier to Nvidia, Advanced Micro Devices, Broadcom, Qualcomm, and others.
Roughly one-third of what those four spend to make chips goes to Taiwan Semi. A single supplier amounting to 33% of the total cost of goods sold for any company isn't typical and it's another sign that Taiwan Semi is critical.
45%
Nividia, and others, get their chips from Taiwan Semi and then sell them on. Payments from Microsoft, Meta, Alphabet, Amazon, and Tesla account for about 45% of Nvidia's total sales.
Apple doesn't buy a lot of Nvidia chips at this point. But Apple accounts for about 27% of Qualcomm's sales and about 17% of Broadcom's.
Theoretically, no Taiwan Semi means no iPhones, A.I. servers, and other electronics on which people have come to depend on. That's why Barron's Tae Kim called the real risk of disruption at Taiwan Semi a " Global Depression."
U.S.-listed shares of Taiwan Semi were down 0.8% in premarket trading at $164.52, giving the company a market value of just under $790 billion. S&P 500 and Dow Jones Industrial Average futures were up 0.5% and 0.2%, respectively.
Coming into Monday trading, Taiwan Semi stock has fallen about 12% over the past week.
Write to Al Root at [email protected]
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 22, 202406:57 ET (10:57 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
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