Taiwan Semiconductor is the real prize

Geopolitics and machinations of war are the smokescreen for the real M&A play, being Economic.

Much like Ukraine having certain assets or businesses of interest to Russia (Ukraine is the world’s 4th or 5th largest exporter of Iron Ore, Wheat and Corn)……China would like to control Taiwan Semiconductor.

There is no company of meaningful national interest as Taiwan’s……Taiwan Semiconductor Manufacturing Company (TSMC)

TSMC is a giant. Its capital expenditure plans for 2022 alone will be $44 billion.

Japan is courting them to open up facilities or move more of their operations there.

Certain states in the U.S. have offered TSMC incentives to move there, with a new plant being built in Arizona.

With 54% global market share of the semiconductor foundry market, it’s no wonder.

These guys build and design a bucket load of the world’s semiconductor chips.

Furthermore, they make 92% share of the world’s most sophisticated and advanced chips found in phones, cars etc.

They are the exclusive provider of chips in Apple’s iPhones and most Mac computers.

In fact, Apple accounts for 25% of TSMC’s annual revenue of $57 billion.

Qualcomm, Broadcom, AMD and Nvidia are also major customers. Or put another way, they rely heavily on TSMC.

TSMC is also an important company for the United States.

And TSMC knows it.

Under the category of self-interest, this is why the world is either trying to either lure them towards their shores or help protect them (and their self-interest) out of fear that TSMC falls under Chinese control.

To illustrate the level of TSMC’s national importance, if we look at the $21 trillion GDP of the United States, its largest company, Apple has a market cap of $2.9 trillion. Then Microsoft is at $2.3 trillion, followed by Google at $2 trillion while Amazon is $1.55 trillion.

Germany has a GDP of $3.8 trillion.

Its largest company market caps are SAP at $165 billion, Siemens and Volkswagen are $130 billion, Allianz is $105 billion while Merck, Daimler and Deutsche Telekom are all around $90 billion each.

While Japan’s GDP is $5 trillion, Toyota’s market cap is $248 billion and Sony is $148 billion

and within Australia’s GDP of $1.3 trillion, the listed market caps of its national goliath’s include BHP at $169 billion, Commonwealth Bank is $168 billion and CSL comes in at $130 billion.

In Taiwan, its GDP is $760 billion.

Taiwan Semiconductor has a market capitalisation of $613 billion.

No other company globally comes close to having a market cap as large as the whole of its ‘home’ nations entire annual GDP.

February 2, 2022

by Rob Zdravevski

rob@karriasset.com.au

#TSMC #taiwan