Taiwan Semiconductor Manufacturing (TSM) vs. Power Integrations (POWI): Which

With extensive usage of chips in various end-use applications, technological advancements, and favorable government initiatives, the semiconductor industry’s long-term outlook appears bright. So, let’s compare prominent semiconductor stocks Taiwan Semiconductor Manufacturing (TSM) and Power Integrations (POWI) to determine the better buy this week. Read on to know more….

In this piece, I evaluated two semiconductor stocks, Taiwan Semiconductor Manufacturing Company Limited (TSM) and Power Integrations, Inc. (POWI), to determine which is worth buying this week. Based on the fundamental comparison of these stocks, I believe TSM is the better buy for the reasons explained throughout this article.

Despite a short-term downturn due to several macroeconomic challenges, the semiconductor industry’s long-term outlook seems promising. The extensive usage of chips in a wide range of end-use applications, including consumer electronics, automotive, industrial equipment, communications, and data processing, is the primary factor bolstering the semiconductor industry’s growth.

According to the Semiconductor Industry Association (SIA), global semiconductor industry sales totaled $40.70 billion for May this year, an increase of 1.7% month-on-month.

“Despite continuing market sluggishness compared to 2022, month-to-month global semiconductor sales inched upward in May for the third consecutive month, sparking optimism for a possible market rebound during the second half of the year,” said John Neuffer, SIA president and CEO.

The growing popularity of new, advanced technologies such as artificial intelligence (AI) and the Internet of Things (IoT), which enables memory chips to process vast volumes of data in less time, should provide numerous growth opportunities to the chip industry players in the foreseeable years.

Additionally, the implementation of 5G networks coincides with increasing demand for faster high-performance computer devices. With a new wave of innovation brought on by rising semiconductor technologies, the industry impacts everything from data centers and smart homes and cities to efficient, high-speed networks and the automobile industry.

Supportive government policies and investments are further boosting the semiconductor industry’s expansion. For instance, The CHIPS and Science Act of 2022 includes $52 billion for chip manufacturing. It also provides incentives and tax credits for semiconductor manufacturing companies. This act would strengthen domestic chip manufacturing, design and research, and reinforce the nation’s chip supply chains.

As per a report by Precedence Research, the global semiconductor market is projected to reach $1.88 trillion by 2032, growing at a CAGR of 12.3%. Moreover, investors’ interest in semiconductor stocks is evident from the VanEck Vectors Semiconductor ETF’s (SMH) 37.4% returns over the past six months.

The semiconductor industry’s tailwinds should bode well for TSM and POWI.

TSM has climbed 62.1% over the past nine months compared to POWI’s 54.5% gains. Also, TSM has jumped 39.5% year-to-date, while POWI gained 35.2%. Over the past three months, TSM has gained 19.6% compared to POWI’s 22.8% gains.

Here are the reasons why we think TSM could perform better in the near term:

Recent Developments

On June 8, TSM announced the opening of its Advanced Backend Fab 6, the company’s first all-in-one automated advanced packaging and testing fab to realize 3DFabric integration of front-end to back-end process and testing services. This would support AI, mobile applications, and other products and help customers achieve product success and win market opportunities.

On April 21, TSM signed a 20,000 GWh renewable energy joint procurement contract with ARK Power, a subsidiary of ARK Solar Energy. The agreement enables the company’s suppliers and subsidiaries to purchase renewable energy and assists with electricity evaluation and planning services. This reflects TSM’s commitment to sustainable development and green manufacturing.

On May 9, POWI unveiled the SCALE-iFlex™ LT NTC family of IGBT/SiC module gate drivers. SCALE-iFlex LT gate drivers would improve current sharing accuracy and therefore increase the current carrying capability of multiple-paralleled modules by 20 percent, allowing users to increase the chip utilization of their converter stacks significantly. This should bode well for the company.

Also, On March 21, POWI launched a 900-volt gallium-nitride (GaN) extension to the company’s InnoSwitch3™ family of flyback switcher ICs. The new ICs, which feature the company’s proprietary PowiGaN™ technology, deliver up to 100 watts with better than 93 percent efficiency, eliminating the need for heat sinks and streamlining the design of space-challenged applications.

Recent Financial Results

TSM’s net revenue increased 3.6% year-over-year to $16.72 billion in the first quarter that ended March 31,…