As requested by @HannahBaker : TYO: $8035 (-0.76%) Analysis as of 17/11/2024.
6M: 📉 -0.48%
YTD: 📈 +9.96%
5Y: 📈 +33.55%
Company: Tokyo Electron is supplier of semiconductor production equipment (i.e., used to create semiconductor devices such as microprocessors, memory chips, integrated circuits) and flat panel display manufacturing equipment (i.e., used to create displays on tvs, phones).
Market Position: Key playe in semiconductor equipment market. Competes with $ASML (-1.59%) , $LRCX (+0.38%) , and $AMAT (+0.53%). Would be positioned well for 5G, AI, Automotive Semiconductors, and QM.
Recent Developments: Increasing demand for advanced semiconductors has increased their B2B customer orders, mainly driven by Data Centres, AI, and IoT. However, Geopolitical tensions between Taiwan, China, and the rest of the world has added uncertainty due to possible restrictions on advanced chip exports (i.e., logistics halted).
MARKET CONTEXT
Macro Trends:
- Tailwinds: Accelerating adoption of AI, 5G, and advanced computing obviously boosts demand for their equipment. For example, here in Australia, they recently shut off 3G (https://www.telstra.com.au/support/mobiles-devices/3g-closure#:~:text=From%2028%20October%202024%2C%20the,VoLTE)%20including%20VoLTE%20Emergency%20Calling.)
- Headwinds: As mentioned above, geopolitical uncertainties may slow this down. Additionally, it was reported that China has spent more on chipmaking equipment to expand its semiconductor capacity (https://www.theregister.com/2024/10/25/mature_chip_output_china/#:~:text=While%20most%20industry%20attention%20is,in%202025%2C%20according%20to%20TrendForce.)
Competitive Landscape:
- Aside from what was mentioned above (i.e., China), $ASML (-1.59%) 's dominant position in EUV lithography and $LRCX (+0.38%) 's etching may cause a problem.
INVESTMENT THESIS
Bull Case:
- Sustained revenue growth mostly driven by demand for chip manufacturing.
- Shareholder-friendly policies (e.g., dividends, buybacks).
Bear Case
- Cyclical downturn in semiconductor demand could impact earnings.
- China's in-housing of development (i.e., they may increase supply.
- Heightened geopolitical risks from US/Taiwan and China tensions.
Notes:
- I did not include a financial analysis as I am not trained in that (Any experts, I would love to hear your thoughts).
- I do not own any investments of the companies listed on this post.
- I hope you found this insightful.
