Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Equity Bottom-Up

United Microelectronics Corp / Equity Bottom-Up

<ul>
<li>UMC reported 2Q23E results with revenue falling 20% YoY and EPS down 30% YoY. Results were higher than consensus but forward guidance was worrisome in our view.</li>
<li>We are concerned by UMC’s high exposure to more mature technology nodes, limited exposure to AI, and vulnerability to China competition forced to focus on non-leading edge technology nodes.</li>
<li>We rate the stock Underperform with a target price of $36 which implies a 2023E PER of 10x.</li>
</ul>


UMC reported 2Q23E results with revenue falling 20% YoY and EPS down 30% YoY. Results were higher than consensus but forward guidance was worrisome in our view.
We are concerned by UMC’s high exposure to more mature technology nodes, limited exposure to AI, and vulnerability to China competition forced to focus on non-leading edge technology nodes.
We rate the stock Underperform with a target price of $36 which implies a 2023E PER of 10x.


United Microelectronics: Underperform; Exposed to China Competition Avoiding Tech Restrictions

Semiconductor & Technology Specialist, Ingenuity

William Keating

Semiconductor & Technology Specialist

TSMC (Taiwan Semiconductor Manufacturing) / Equity Bottom-Up

TSMC (Taiwan Semiconductor Manufacturing)

<ul>
<li>Persistent fabless inventory issues dampen the slope of H2'23 recovery. FY'23 forecast further reduced to a 10% YoY decline</li>
<li>AI-Related hardware will reach 6% of revenues in 2023, a welcome boost but insufficient to counter the negative impact of macro headwinds</li>
<li>TSMC's earnings provides an important read through on the likely results and outlook for the broader semi ecosystem in the coming weeks. </li>
</ul>


Persistent fabless inventory issues dampen the slope of H2'23 recovery. FY'23 forecast further reduced to a 10% YoY decline
AI-Related hardware will reach 6% of revenues in 2023, a welcome boost but insufficient to counter the negative impact of macro headwinds
TSMC's earnings provides an important read through on the likely results and outlook for the broader semi ecosystem in the coming weeks. 


TSMC. AI Tailwinds No Match For Macro Headwinds

TSMC (Taiwan Semiconductor Manufacturing) - ADR / Equity Bottom-Up

TSMC (Taiwan Semiconductor Manufacturing) - ADR

<ul>
<li>Japan's semiconductor technology export restrictions took effect on Sunday and are unlikely to ease for China any time soon.</li>
<li>Apple is reportedly telling suppliers that its flagship iPhone volumes will be similar to last year.</li>
<li>Hon Hai acquires 50% stake in German auto chassis maker, marking a significant expansion in its EV manufacturing efforts.</li>
</ul>


Japan's semiconductor technology export restrictions took effect on Sunday and are unlikely to ease for China any time soon.
Apple is reportedly telling suppliers that its flagship iPhone volumes will be similar to last year.
Hon Hai acquires 50% stake in German auto chassis maker, marking a significant expansion in its EV manufacturing efforts.


Taiwan Tech Weekly: Japan Semi Restrictions Take Effect; Apple IPhone Volumes; Hon Hai Acquisition

<ul>
<li>TSMC reduced 2023 revenue guidance when it reported results during the week. A weaker than expected economy in China and general economic weakness was blamed.</li>
<li>However, the company's results beat Street expectations and management maintained its long-term gross margin guidance of 53%+, which implies the company maintaining a structurally higher margin.</li>
<li>Shares fell after results on a profit taking excuse -- We however note that latest guidance also reaffirmed multi-year strength ahead. Structural Long.</li>
</ul>


TSMC reduced 2023 revenue guidance when it reported results during the week. A weaker than expected economy in China and general economic weakness was blamed.
However, the company's results beat Street expectations and management maintained its long-term gross margin guidance of 53%+, which implies the company maintaining a structurally higher margin.
Shares fell after results on a profit taking excuse -- We however note that latest guidance also reaffirmed multi-year strength ahead. Structural Long.


TSMC: 2023 Guidance Reduction Excuse To Take Profit? Guidance Also Affirmed Long-Term Bullishness

Global Multi-Asset Investment Strategist, True Insights

Jeroen Blokland

Global Multi-Asset Investment Strategist

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<ul>
<li>While early, the comparison to the previous quarter is remarkable. Almost all sectors reported better-than-expected earnings, but the market reaction has been negative in most cases. </li>
<li>Investors are fixated on inflation and the end of the Fed's tightening cycle. But the strong US labor market means the Fed will want to keep rates higher for longer. </li>
<li>The net percentage of bulls in the survey has risen to nearly 30%, pushing our Fear &amp; Frenzy Sentiment Index further into 'Frenzy' territory.</li>
</ul>


While early, the comparison to the previous quarter is remarkable. Almost all sectors reported better-than-expected earnings, but the market reaction has been negative in most cases. 
Investors are fixated on inflation and the end of the Fed's tightening cycle. But the strong US labor market means the Fed will want to keep rates higher for longer. 
The net percentage of bulls in the survey has risen to nearly 30%, pushing our Fear &amp; Frenzy Sentiment Index further into 'Frenzy' territory.


The Weekly Market Monitor (29) - The Moment of Truth?

Taiwan

Taiwan Semiconductor Manufacturing Company Ltd. manufactures integrated circuits based on its proprietary designs.  The Company offers a comprehensive set of integrated circuit fabrication processes to manufacture CMOS logic, mixed-mode, volatile and non-volatile memory and BiCMOS chips.  Taiwan Semiconductor is an affiliate of Philips Electronics N.V.

TSMC (Taiwan Semiconductor Manufacturing) - ADR (TSM US)

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TSMC (Taiwan Semiconductor Manufacturing) - ADR (TSM US)

United Microelectronics: Underperform; Exposed to China Competition Avoiding Tech Restrictions

We are concerned by UMC’s high exposure to more mature technology nodes, limited exposure to AI, and vulnerability to China competition forced to...

Vincent Fernando, CFA

TSMC. AI Tailwinds No Match For Macro Headwinds

Fabless inventory issues dampen slope of H2'23 recovery. FY'23 forecast now -10% YoY. TSMC's provides an important read through on the likely...

William Keating

Taiwan Tech Weekly: Japan Semi Restrictions Take Effect; Apple IPhone Volumes; Hon Hai Acquisition

Japan's semiconductor technology export restrictions took effect on Sunday and are unlikely to ease for China any time soon.

Vincent Fernando, CFA

TSMC: 2023 Guidance Reduction Excuse To Take Profit? Guidance Also Affirmed Long-Term Bullishness

Results beat Street expectations and management maintained its long-term gross margin guidance of 53%+, which implies the company maintaining a...

Vincent Fernando, CFA

The Weekly Market Monitor (29) - The Moment of Truth?

The US labor market remains uncomfortably tight, keeping bond yields high, providing massive pressure on overvalued Big Tech stocks to deliver on...

Jeroen Blokland

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