Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) spent yet another session in the narrow range of $22.50-$24.00, in which the stock has been meandering for the last 3 weeks. The only significant thing was the surge in volume, which at 28 million was nearly double the daily average of 15 million. The stock price saw a mild loss of 1.15% though it managed an intraday recovery of about 2.5% from the day low.
Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM) has seen some erosion of its value in the short term due to the news of two major vendors of smartphone applications processors, QUALCOMM, Inc. (NASDAQ:QCOM) and MediaTek Inc. (TPE:2454) have decided to move some of their 28 nanometer chip manufacturing business to other foundries as the chip designers are looking to reduce their own costs. The price of the entry level and midrange smartphone chips have dropped over 20% in the last 1 year but TSM may not budge from their prices.
On the other hand, the stronger US dollar has affected the European and emerging market purchasing power to a great extent, which has resulted in a business slowdown in the last 2 months. That means the previously expected rate of growth of the foundry market may be needed to be modified as the near term demand gets reduced across multiple end markets and nodes.
Technically, the longer term uptrend for the stock remains intact. For the last few weeks, the stock has been trading in the range of $22.50-$25.00 with a lot of sharp moves inside, but that can be taken as a bullish consolidation only, as long as the channel containing the entire price action in the last 6 months is not breached on the downside. Only a break below the immediate support at $22.50 may drag the price down to the long term support around $20.