GIULIETTA TALEVI: Still time to cash in your chips?
Is it too late to cash in on the great semiconductor rally of the last year?
Not if the worldwide chip shortage is anything to go by. Now, we’re not talking a tasty salt and vinegar snack here, but the increasingly tiny components that are absolutely essential to every gadget of modern life, including cars.
And such has been the demand for semiconductors — or chips — that the major manufacturers just cannot keep up.
The supply crunch has begun to pinch the motor manufacturing industry, to the extent that firms such as General Motors and Hyundai are being forced to idle production. This week, Volvo announced that it would have to suspend production for up to a month. And it all means, according to Bloomberg, that the great chip crunch could end up costing global carmakers a staggering $61bn in lost sales this year.
Such is their worldwide importance that Bloomberg even has this fascinating podcast on how the chip shortage — and subsequent ballooning prices — could end up being the elusive inflation trigger in the US.
While it’s bad news for carmakers, for the investors in the companies that manufacture these devices, it’s been a swell time.
ASML Holding, the Dutch company that makes the equipment to manufacture these chips, has had its shares double over a year.
Taiwan Semiconductor Manufacturing Co (TSMC) has gained 108%, while US gaming chip giant Nvidia has rallied 106%.
“Normally a low-key company,” it writes, “TSMC’s massive investment in cutting-edge technology and growing influence are quietly drawing it into the limelight. At a time when a global chip shortage has forced slowdowns or even suspensions of car production from Japan to Europe and America, and with politicians in many countries making noises about bringing more manufacturing onshore, the Taiwanese company’s dominant position in global chip production is attracting attention.”
TSMC is about to build a huge new plant for the manufacture of three-nanometre chips, which are semiconductors “expected to be up to 70% faster and more power-efficient than the most advanced in production”. And if you’re an investor in the company, or prospective investor, you’ll be pleased to know that only TSMC and Samsung Electronics have mastered the technology to make these tiny devices.
It’s a forgotten corner of the technology market, but it’s perhaps the most critical.
*Talevi is the FM's Money & Investing editor.
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