Despite patent lawsuits, foreign brokerages remain upbeat about TSMC

According to the European securities house, on the back of its strong R&D capability, about 96 percent of TSMC's patent applications secured approval from U.S. intellectual property rights supervisory authorities from 2013-2017. (NOWnews)
According to the European securities house, on the back of its strong R&D capability, about 96 percent of TSMC's patent applications secured approval from U.S. intellectual property rights supervisory authorities from 2013-2017. (NOWnews)

TAIPEI (CNA) — Although Taiwan Semiconductor Manufacturing Co. (TSMC) is currently facing patent lawsuits filed by U.S. rival GlobalFoundries Inc., foreign brokerages remain upbeat about the Taiwanese contract chipmaker and confident in its ability to develop high-end technology, advising investors continue to buy TSMC shares.

In a research note, a European brokerage said Wednesday that TSMC, the world’s largest contract chipmaker, which commands more than 50 percent of the global market, owns 37,000 patents which made it the sixth largest patent holder in the U.S. market in 2018 after spending almost US$3 billion in research and development.

The research paper came after it was reported Monday that U.S.-based contract chipmaker GlobalFoundries had filed lawsuits in federal courts in the U.S. and Germany, accusing TSMC of stealing its patents, and had also lodged a petition with the U.S. International Trade Commission (USITC) making similar allegations.

In the lawsuits and USITC petition, GlobalFoundries is seeking an import ban on TSMC chips, which could roil the market for crucial processors used in a wide range of electronics gadgets, including the iPhone, according to the reports.

The U.S. and Germany have been the major markets for GlobalFoundries, which has invested more than US$15 billion in the U.S. and US$6 billion in European markets over the past decade, market analysts said.

According to the European securities house, on the back of its strong R&D capability, about 96 percent of TSMC’s patent applications secured approval from U.S. intellectual property rights supervisory authorities from 2013-2017.

The brokerage said TSMC is likely to file countersuits against GlobalFoundries and with a large number of patents, TSMC is expected to defend itself against the legal action taken by its American rival.

The brokerage added both sides could yet settle the lawsuits to resolve their patent disputes.

In a statement released by TSMC on Tuesday, the chipmaker said the company is reviewing the lawsuit filed by GlobalFoundries on Aug. 26, and asserted that the allegations are without merit.

“TSMC is proud of its technology leadership, manufacturing excellence, and unwavering commitment to customers. We will fight vigorously, using any and all options, to protect our proprietary technologies,” the chipmaker said.

As a result, the European securities firm has left an “outperform” recommendation on TSMC shares unchanged and maintains a NT$290 (US$9.24) target price on the stock.

On Wednesday, TSMC shares closed up 0.80 percent to end at NT$252.00 with 15.12 million shares changing hands on the Taiwan Stock Exchange, where the benchmark weighted index ended up 0.45 percent at 10,434.29 points.

Also remaining upbeat about TSMC, a U.S.-based brokerage has maintained an “overweight” rating and a NT$280 target price on the stock.

The U.S. securities house said TSMC leads GlobalFoundries in advanced technology processes by 1-2 years and the lawsuits are unlikely to impose adversary impact on the Taiwanese manufacturer’s operations.

In a corporate social responsibility report filed with the TWSE in 2018, TSMC said it had increased its R&D spending to upgrade its technologies and maintain its lead over competitors. In 2018, TSMC’s R&D spending was US$2.85 billion, accounting for 8 percent of revenue.

Earlier this month, TSMC’s board of directors approved a NT$200.91 billion fund to set up new production lines, improve the company’s technologies, and establish specialty technology capacity.

CNA cannot identify the brokerages because media outlets in Taiwan are not allowed to report the names of foreign brokerages when they give price-moving forecasts for specific stocks or the wider market.

By Jeffrey Wu, Chung Jung-feng and Frances Huang