When you think of 28nm, what do you think of? I think of Nvidia kepler (NVDA), AMD’s 7000 series(AMD), Qualcomm’s s4 krait’s (QCOM), Texas Instruments (TXN) Omap’s and the public fab that makes it all happen, Taiwan semiconductor manufacturing company (TSM:NYSE). Right away you are most likely thinking this is going to be yet another post about CPU’s, GPU’s and SOC’s, while technically is it, the focus today is about the supply and demand of 28nm and the stock that will benefit from its shortage.
It seems that lately, all the rage has been surrounding 28nm parts, and for good reason, the smaller manufacturing process brings tons of benefits in terms of power consumption, cooler running chips, packaging size, performance, the extra freedom it gives chip designers, the list goes on. This is all great as consumers are going to benefit from faster, more power efficient smartphones and video cards etc. Old news right? Everyone knows that tech gets better as time progresses, it’s almost natural. But I don’t think people understand the full implications of what is coming our way. Think big for a moment, the stuff that companies are working on getting to market are relying on smaller more powerful IC’s. Think of it this as a double or triple whammy.
Think of where the market is going in terms of consumer technology over the next couple years. I put it like this, iPad just got a “big upgrade” (waiting on samsung’s 32nm) and sold millions..pfft. Old school tech, the iPad’s SOC will be completely and utterly outdated in a few days, literally, and the new iPad has only been out for around a month. Point is, 28nm is not a small year-over-year upgrade, it is the beginning of the next generation of gadgets, it is a big leap forward. The next xbox will be rocking 28nm, mid-range to high-end smart phones, super phones, ridiculous graphics cards, super efficient server chips, farms for cloud computing, retail cloud boxes for consumers, connected automobiles, tablets, augmented reality, you name it. And dont forget that smaller IC’s are needed for Microsoft (MSFT) to let Windows8 make that b-line for the top. The graphics for gaming consoles alone will make your current rig look like its the original PlayStation. Everything need to be much much more powerful and more efficient, period. Everything is going to be 28nm for some time to come.
So if you haven’t noticed over the past few years, now you know. Tech is ramping up at ridiculous rates and it is not gonna slow down until we get food replicators and warp drives. For the near future though, we have 28nm and its finally here, so why are we still playing the waiting game? Where is the onslaught of inexpensive/awesome stuff to blow our hard earned dollars on..ahhh, almost there.
Back to the Stocks.
All of this tech is being funneled though TSMC’s fabs. hold stock in the company? Good. Following the news about TSMC (TMS:NYSE) and its issues with 28nm? Remember not too long ago when the fab shut down production for mysterious reasons? If you use your imagination, you can assume that the fab is at capacity and needs more of it, big time. Now, if there is one thing I hate, it’s waiting to get new tech in my grubby little hands, companies hate delays and share holders everywhere, well lets say that in a perfect world, the word delay would not exist. I’m guessing TMSC is claiming that their hands are tied in terms of getting their other foundries fitted for 28nm.
So one would think the entire tech world is revolving around TSMC right about now, as its performance can greatly impact tons of products, a industries bottom line and of course your stock price. Sounds like risky business. Good news is that there are other public fabs that have 28nm, most notably United Microelectronics (UMC:NYSE, TW:2303) in Taiwan. Never heard of them, right? Not many have, the big focus has been on TSMC for some years now, and if you look at the two companies stock history you can see it. For example, UMC sales fell 14.6% this march from the previous.The stock looks like a fool buy just by looking at the one number alone.
Analysts say UMC’s stock is a hold, a few analysts gave upgrades to out-perform and buy. Qualcomm, Nvidia and AMD etc all want to ship 28nm to the masses asap and TSMC is being extremely slow to expand the foundry to meet the demand. It’s turning into a classic story of who’s fault is it for the delay but this time is looking extremely apparent. TSMC just have too much on their plate ,their stock has gained continuously and the only way up is to charge their customers more (which they did) or expand their foundry. This is where UMC picks up the slack, and profits. You following me?
Interesting company UMC is, while researching the company the first thing that caught my eye was its market share. It is second only to TMSC, understandable seeing that lately TMSC seems to be the only name in the game, but seriously? UMC has more market share than global-foundries, albeit not by much but still. The company was also the first semiconductor company in Taiwan to open up shop and they have 28nm. Of course this does not mean anything when we think about stock price, but it does tell us that they have the means to deliver parts to its customers although not in the volume that TMSC can deliver. Sources are saying that production is spilling over to UMC and it absolutely makes sense. Last night UMC gained 2.17% on the Taiwanese market and held flat today on the exchange here in the states, while pretty much everything else fell. As of 04.10.2012 UMC is gaining in its native market and here in the states it looks like the market movers are keeping the price steady with limit orders, a fund stock.
The stock is not moving much here on the U.S. market, the stock price is $2.45 ttm with EPS ttm at $0.14, its below the book value per share $2.79. The stock has a PEG of 1.12 compared to TMSC of 1.06. Returns and margins are not nearly as high but UMC has half the outstanding shares and the price is 1/6th compared to TMSC. A fund stock sure, go long and you wont be disappointed, chances are your probably already in. Swing it this quarter at least and you wont be disappointed. Its P/E is 18.15 so its either grossly overpriced or someone somewhere thinks its got a great future ahead. you follow me?
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As always, leave a comment, let me know if i’m doing it right.