TSM.....Will also zoom in on this one going forward. The real chip recovery will start right here.
TAIPEI (Dow Jones)--Shares of Taiwan Semiconductor Manufacturing Co. (TSM), the world's largest contract chipmaker, are trading higher Thursday after the Taiwan government approved in principle the company's China investment plans.
TSMC plans to invest US$898 million in an older-technology, 8-inch chip plant near Shanghai.
"This development is definitely positive for the share price and for the whole market because it shows the (Taiwan) government is not opposed to comanies investing in China," said George Wu, chip analyst at Primasia Securities in Taipei.
At 0314 GMT, TSMC was up 4.6% at NT$50 (US$1=NT$34.713) on volume of 42 million shares.
The technology subindex was up 3%, while the main board benchmark index was 2% higher at 5093.66.
Wu said the chipmaker's stock has limited upside, to around NT$50-NT$51, with investors mostly focusing on what TSMC chairman Morris Chang's outlook will be at next week's fourth-quarter shareholders' meeting.
Stock analysts are looking closely for signs of improvement in TSMC's gross margins, which have been dropping due to discounts given to customers during the downturn.
Plans by lawmakers in the Taiwan Solidarity Union, a small but key partner of the ruling party, to protest the Cabinet's decision to back in principle TSMC's plans to invest in China has not hurt TSMC shares so far.
"I don't think it will have any impact," said Wu, adding that "it's a small problem."
The TSU is obliged to protest against the plan since investment in China is against the party's political philosophy and "if they don't protest, they don't have any reason for existing," he said.
The market expected some reaction from the TSU, and had already factored this into the share price.
The call for a protest is likely to be drowned out by louder voices in favour of China links. Although many Taiwanese have watched in dismay as factories close shop on the island and move to China where costs are lower, others see the value of using mainland China as a lucrative production base and market, with higher value- added work done in Taiwan.
AI
