Intel Vs. Taiwan Semiconductor: Which Is A Better Buy?
Publish Date: 2017-09-28



Both TSMC and Intel are leading semiconductor companies.


Intel has higher gross margin but TSMC delivers better return on equity.


While Intel continues to lead in operating cash flow generation, TSMC has closed the gap in recent years.


TSMC is currently trading at a PE multiple higher than Intel.


Taiwan Semiconductor Manufacturing Co. (TSM) and Intel (INTC) are among the leading semiconductor manufacturing companies. Taiwan Semiconductor Manufacturing Co. or TSMC is world’s largest dedicated foundry for fabless firms such as Nvidia (NVDA), Apple (AAPL), and Qualcomm (QCOM). On the other hand, Intel is the leader in the integrated design and manufacturing of microprocessors.


Both TSMC and Intel are very profitable companies and well positioned to capture trend of artificial intelligence and data center computing. Both stocks are suited for long-term investments. In this article, we will compare both companies and help investors make a better decision which company to invest.


Historical Performance


Let us first take a look at TSMC and Intel’s share price performance in the past. The chart below shows both companies’ historical performance in the past 10 years. As can be seen, both TSMC and Intel were hit by a wide global recession in 2008/09. Since 2009, TSMC’s share price begin to part away from Intel. TSMC’s dedicated foundry provided the capacity for mobile IC design firms while Intel’s revenue growth was impacted by struggling PC sales. TSMC is clearly the winner based on past historical performance.



Financial Metrics


We will take a look at four different sets of metrics, gross margin, revenue and EPS growth, cash flow metrics, and its ROE.


Below is the chart that shows the gross margin between Intel and TSMC. As can be seen, Intel continues to lead its gross margin by about 100 basis points in the past 10 years as Intel’s high-performance computing products generally has higher gross margin.

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