Taiwan has been a recent focal point in world political landscape and we think you should start seriously paying attention. In this analysis, we won’t be giving our opinion on the politics of the situation, but we will be giving our analysis on the top companies that will be DRAMATICALLY impacted if China invades Taiwan.
Taiwan’s TSMC accounts for over 55% of the global foundry market for semiconductors. Semiconductors are those little chips in every. single. thing. that we use today. Your cell phone, your car, your hair dryer, your vacuum cleaner, your fridge, your headphones, your TV, the auto feeder for your pet cat, the server that’s hosting this web page that you’re reading right now… essentially EVERYTHING.
Ok, so what should you do?
Pay serious attention to these two things.
- China’s aggression towards Taiwan. China’s been threatening to invade Taiwan by force and the US, being Taiwan’s biggest advocate, has been in talks with allies on what it would do in response. How this plays out will demonstrate to the world who the new superpowers of the world are and during the tumultuous times it’ll cause, we don’t see it playing well for any of the stock markets.
- TSMC is ACTIVELY trying to move it’s manufacturing away from Taiwan. However, this is like dislodging a giant cargo ship from a tiny canal. It’s going to take billions of dollars and likely years before the multi-billion dollar manufacturing facilities can be entirely relocated.
All in all, this means that our analysts project that the following companies will be impacted by China’s aggressive actions towards Taiwan. We’ve broken these out into tiers where the T1 will be dramatically impacted and T2 will be slightly impacted.
Tier 1 Impacted Stocks:
These companies have critical components that are relying on TSMC for production and will be dramatically impacted. We think you should reconsider your holdings until the political situation settles down or these companies diversify their chip production away from their heavy reliance on TSMC.
Tier 2 Impacted Stocks:
These are customers of the companies above and will be affected due to the shortage in TSMC silicon. These companies can theoretically get their chips manufactured elsewhere, but with all the Tier 1 companies being impacted, they will still feel the effects of the global disruption.
- Western Digital