Taiwan Semi Takes Off
Things are looking brighter for the next big tech upgrade: 5G.
Strong sales of 5G products — networking equipment and smartphones — are expected to start in 2020.
Technology and semiconductor companies are opening their wallets, positioning themselves to benefit from the new, blazingly fast infrastructure buildout and device-replacement cycle.
What’s This Mean for Tech Investors?
For example, Taiwan Semiconductor (NYSE: TSM), the world’s largest independent semiconductor manufacturer, has announced that it will spend massive amounts in 2020 upgrading equipment and building out capacity for 5G. This year alone the company will spend $15 billion, a 50% increase over previously planned capital expenditures.
TSM is seeing strong demand for chips built on the smallest process nodes — 7 nanometers. They expect these new, smaller chips to come into even more demand next year as 5G takes off, but the company is already looking ahead and planning on launching commercial production on 5nm chips in 2020.
Taiwan Semiconductor isn’t alone in this respect. Japanese conglomerate Sony Corp. wants to grab a share of the 5G smartphone market as well, investing $900 million in a new smartphone camera plant. Sony believes 5G will spur demand for high-end cameras.
We’ve seen this sort of story play out before, where new technology creates demand for a new generation of chips and chipmakers compete fiercely for market share by working on producing the smallest, fastest chips.
We’ve Also Suggested Ways to Profit
Back in early October 2018 we suggested taking a swing on Taiwan Semiconductor as a way to tap into the 5G revolution. As an exclusive maker of Apple’s A12 chip they were in a prime position to be a leader in 5G mobile tech.
The bet has paid off despite volatility in the chip sector this year. Since Oct. 11, 2018, shares are up over 36%. Not too bad considering the drawdown we saw last December and the volatility in the semi sector thanks to Trump’s trade war.
Today, TSM is trading just shy of its all-time high. There could be a pullback in store before we see TSM make any significant moves higher.
In the meantime we can still potentially profit off the chip sector using the VanEck Vectors Semiconductor ETF (SMH).
You can see my full report and bull case for SMH here.
For Technology Profits Daily,
Chief Technology Expert, Technology Profits Daily