Using Taiwan Semiconductor Manufacturing and Micron Technology
Two of the industry’s top companies are Micron Technology and Taiwan Semiconductor Manufacturing. One of the biggest producers of DRAM and NAND memory chips worldwide is Micron, which specializes in these products. The world’s biggest and most sophisticated contract chipmaker, TSMC, focuses on producing chips for businesses like Apple and AMD.
Recent declines and all-time highs
Both Micron and TSMC stock prices hit record highs in January 2022 as a result of projections for a significant increase in demand for new chips. This demand was thought to be fueled by the rise of 5G devices, increased PC sales, innovations in the automotive industry, and renovations to data centers for cloud and AI jobs. The 5G upgrade cycle stopped, PC sales collapsed, and data centers were forced to implement cost-cutting measures because of macroeconomic headwinds and increasing rates. As a result, there was a chip oversupply, which forced several chipmakers to cut back on manufacturing. Both Micron and TSMC are currently trading 38% and 30% below their all-time highs, respectively.
Comparison between TSMC and Micron
Different business models distinguish Micron and TSMC. While TSMC only produces semiconductors for other firms, Micron designs, makes, and sells its own processors. DRAM chips (69%) and NAND chips (27% of Micron’s revenue) are its two main sources of income. In contrast, TSMC’s income is derived from the high-performance computer (42%), smartphone (38%), automotive and IoT (14%), and other industries.
Future Prospects
In the most recent fiscal year, Micron’s sales growth slowed down, expanding by 11% as opposed to 29% the year before. This was brought on by a decline in PC and smartphone sales as well as the effect COVID-19 lockdowns in China had on data centers. The firm, which anticipates a significant fall in sales in the following year, has taken steps to stabilize its margins, including reducing its personnel and capital expenditures (capex).
The sales and profitability of TSMC, on the other hand, have been increasing consistently, increasing by 43% and 70%, respectively, throughout the most recent fiscal year. In the future year, this growth is anticipated to taper down, with a 2% increase in sales and a 14% drop in earnings. Analysts anticipate a turnaround for the business in 2024, with a 20% increase in revenue and a 22% increase in profits.
Final Reflections
Although TSMC and Micron are both significant participants in the semiconductor industry, TSMC is bigger, more diverse, and exhibits more steady growth. Additionally, it is valued more favorably, selling at 16 times projected earnings and 6 times this year’s sales. The value of Micron, on the other hand, is less obvious because of its recent losses even though it trades at four times this year’s sales. If you had to pick one, TSMC would be the best choice based on these criteria.