Semiconductor Chip Inflation Risk - Taiwan Semi to Face Up to 25% Electricity Tariff Hike in Taiwan
Portfolio Pulse from Anusuya Lahiri
Taiwan Semiconductor Manufacturing Co (TSM) is set to face a 15% to 25% increase in electricity tariffs in Taiwan starting April 1, as part of a broader move to alleviate financial strain on Taiwan Power Co. This hike is expected to have a minimal impact on TSMC's operations but could pose long-term profitability challenges. The tariff increase is in response to Taiwan Power Co.'s significant losses and rising fuel costs. TSMC's stock value has increased by 51% in the last 12 months, and it is a key supplier to Nvidia Corp (NVDA). Investors can gain exposure to TSMC through the VanEck Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX).
March 22, 2024 | 12:16 pm
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NEUTRAL IMPACT
As a key supplier to Nvidia Corp, TSMC's operational costs and profitability could indirectly impact NVDA's supply chain efficiency.
Given TSMC's role as a key supplier to Nvidia, the electricity tariff hike could have indirect implications for NVDA's supply chain efficiency and cost structure, although the immediate impact is likely minimal.
CONFIDENCE 70
IMPORTANCE 50
RELEVANCE 60
NEUTRAL IMPACT
Investors in VanEck Semiconductor ETF, which includes TSMC, should monitor the potential long-term impacts of TSMC's increased operational costs.
As TSMC is included in the VanEck Semiconductor ETF, the electricity tariff hike could have implications for the ETF's performance, particularly concerning TSMC's long-term profitability and operational costs.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEUTRAL IMPACT
iShares Semiconductor ETF, which includes TSMC, may see indirect impacts from TSMC's increased operational costs due to the electricity tariff hike.
Given that TSMC is part of the iShares Semiconductor ETF, the increased electricity tariffs in Taiwan could indirectly affect the ETF's performance, especially in terms of TSMC's long-term profitability and cost management.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEUTRAL IMPACT
TSMC to experience a 15-25% electricity tariff hike in Taiwan, potentially affecting long-term profitability despite minimal short-term impact.
The electricity tariff hike is expected to have a minimal short-term impact on TSMC's operations but could pose challenges to long-term profitability. The company's significant stock value increase over the past year suggests strong market performance, potentially mitigating immediate negative impacts.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 90