Intel Corp (INTC)

[walbert]

Given that TSMC'S net margins are 32% vs. Intel's 22%, I wouldn't say it's a problem. You need to ask where Intel is spending money OTHER than capex... And I've already given you the answer. While TSMC spends 500M/q on SG&A, Intel spends almost $5B/q.

[Net margins are meaningless. The bottom line is that TSMC doesn't have the GROSS revenues or GROSS profits to support its CapEx. You flip back and forth between gross figures versus percentages in an apples and oranges effort to prove your case. But it's just not happening. Anyone with basic accounting skills can do an apples to apples comparison and see that your conclusions are wrong.]

I.e. it costs Intel 10x as much as TSMC to just run its business and maintain that bleeding edge process.

And yet they still easily produce enough free cash flow to support their CapEx, R&D and dividend requirements while TSM doesn't.

TSMC's spending is focused on capacity and they're perfectly happy to allow Intel to spend billions to hack through the process jungle while it follows comfortably just behind. THIS IS A FEATURE, NOT A BUG. It's their whole business model.

[And even so they can't keep up and their CapEx needs are crushing them. What part of "TSMC's dividends have exceeded their free cash flow in all of the last 4 years" can't you get your head around?]

TSMC can concentrate a much larger percentage of its spending directly on expanding capacity than Intel, while still spending LESS overall than Intel as a percentage of revenues.

A percent of something is meaningless if the gross dollars are inadequate. And TSM is spending hugely more on CapEx as a percentage of revenue than Intel.

Meanwhile, Intel just shuttered their big new fab shell in Chandler, worth nearly a couple $B... Yesterday, was it?

Intel has significant excess capacity. TSM doesn't. TSM has consistently made Qualcomm, AMD and Nvidia crazy with its inability to meet high-end product orders. You would think this would enable you to see the advantage in excess capacity.

Don't buy the BS line that TSMC's sky is falling, the main proponent of which seems to rely entirely upon Intel-sourced statements and predictions.

Except for ExtremeTech, Morris' own words and what a number of analysts have written in the last week. There's more. You need to come out of the state of denial.