Taiwan Semiconductor Manufacturing Co (TSM) has made a strategic move by acquiring Innolux Corp’s flat-panel display plant in Tainan for a hefty $530.6 million. This acquisition underscores Taiwan Semiconductor’s commitment to expanding its operations and increasing its capacity for chip packaging. The company’s Chair, C.C. Wei, had previously highlighted the critical need to double their CoWoS (Chip-on-Wafer-on-Substrate) capacity. This acquisition aligns perfectly with that goal.
Innolux, on the other hand, is focusing its efforts on upgrading its existing facilities and expanding into the lucrative chip packaging market. Notably, they have previously transformed a 3.5-generation facility to enable fan-out panel-level packaging (PLP) for offering cost-effective chip packaging services.
Taiwan Semiconductor’s ambition is evident in their recent board ratification of capital expenditures worth $29.62 billion. This substantial investment will not only support the construction of new fabrication plants (fabs) but also facilitate the installation of advanced manufacturing facilities.
The company is in a strong financial position, boasting a cash and equivalents balance of $63.3 billion as of June 30, 2024. This financial strength provides ample resources for pursuing growth initiatives and strategic acquisitions.
Analysts remain optimistic about Taiwan Semiconductor’s future prospects. Susquehanna analyst Mehdi Hosseini has maintained a Positive rating for the company and set a price target of $250. Taiwan Semiconductor has already demonstrated significant growth, with its stock price surging 89% in the past year.
Investors seeking exposure to Taiwan Semiconductor can explore options like the iShares Semiconductor ETF (SOXX) and the First Trust NASDAQ Technology Dividend Index Fund (TDIV).
Looking ahead, Taiwan Semiconductor’s revenue has exhibited an impressive average annual growth rate of 17.75% over the past five years. Analysts are forecasting an average 1-year price target of $212.0, representing a potential upside of 21.46% in 2025.
While past performance is not indicative of future returns, it’s essential for investors to consider a stock’s historical performance alongside its industry peers and relevant benchmarks. Taiwan Semiconductor’s shares have delivered an annualized return of 18.65%, outperforming the S&P 500 index by a significant margin of 10.62%. However, this performance falls slightly behind the 25.51% growth achieved by the overall Information Technology sector. Taiwan Semiconductor has a beta of 1.03, indicating a moderate level of volatility compared to the overall market.
TSM shares started the week on a positive note, trading up by 0.01% at $174.55 in premarket trading.
