Taiwan Semiconductor Halts Shipments After Huawei Link Discovered, US Sanctions Cited

Taiwan Semiconductor Manufacturing Co TSM recently halted shipments to a customer after discovering that its semiconductors were sent to Chinese smartphone giant Huawei Technologies Co, potentially violating U.S. sanctions, Barron’s cites a Taipei government official.

On October 11, Taiwan Semiconductor found that chips for its specific customer made their way to Huawei.

The U.S. has barred China from accessing Nvidia’s sophisticated AI chips, citing national security interests.

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The U.S. semiconductor embargo prompted Chinese companies to employ illegal routes to access the chips.

In response, Taiwan Semiconductor activated export control measures, halted shipments to the client, and informed US and Taiwanese authorities, according to a Reuters report.

Barron’s report says Taiwan Semi confirmed it had not supplied Huawei since mid-September 2020, in compliance with export regulations, and reported the incident to the U.S. Commerce Department.

Taiwan’s economic ministry confirmed to Barron’s that Taiwan Semiconductor reported the incident but did not disclose the customer involved.

No further shipments have been made since October 11. The world’s largest contract chip manufacturer is critical in producing chips for companies like Apple Inc AAPL and Nvidia Corp NVDA.

Huawei, a leader in 5G network equipment, has been at the center of a tech conflict between Beijing and Washington since the US imposed sanctions in 2019 over espionage concerns, which Huawei denies.

Taiwan Semiconductor stock gained over 119% in the last 12 months. The contract chipmaker’s upbeat quarterly print bore testimony to its artificial intelligence technology moat.

It reported third-quarter topline growth of 39% to $23.50 billion, topping the $22.4 billion-$23.2 billion guidance and the consensus estimate. Needham analyst Charles Shi attributed the performance to a potent 3 nm performance primarily due to Apple.

Is Taiwan Semiconductor A Good Stock To Buy?

When deciding whether to buy a stock, there are some key fundamentals investors may want to consider. One of these factors is revenue growth. Buying a stock is essentially a bet that the business will continue to grow and generate profits in the future.

Taiwan Semiconductor has reported average annual revenue growth of 18.45% over the past 5 years. .

It's also important to pay attention to valuation when deciding whether to buy a stock. Taiwan Semiconductor has a forward P/E ratio of 22.42. This means investors are paying $22.42 for each dollar of expected earnings in the future. The average forward P/E ratio of Taiwan Semiconductor's peers is 33.52.

Other important metrics to look at include a company's profitability, balance sheet, performance relative to a benchmark index and valuation compared to peers. For in-depth analysis tools and important financial data, check out Benzinga PRO.

Price Action: TSM stock is down 0.57% at $199.72 at last check Thursday.

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