Apple Inc. (AAPL): A Tech Giant Reconfigures its Supply Chain

The Heart

Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM), meanwhile, could be on the verge of a new growth phase. Its top and bottom lines dipped during the recession and have since recovered nicely. The chip business tends to be highly cyclical. As the largest chip foundry, however, it has been reliably profitable where others tend to vacillate between red and black ink.

That said, if Apple continues to shift production to Taiwan Semi and away from Samsung, Taiwan Semi will have found a massive new customer. That could take revenues and earnings up a notch. With a PE of around 18, Taiwan Semi isn’t cheap, but it could be a good option for growth investors who see its new partnership as a catalyst to growth. An around 2.2% dividend yield is icing on the cake.

Suffering

Samsung shares have fallen of late as investors question its ability to attract new customers in mature mobile markets. Apple Inc. (NASDAQ:AAPL) shifting to a new supplier is another headwind to face. And the company’s efforts to build its own mobile OS is a big risk, too.

Samsung’s top-line has more than doubled over the last half decade, but that’s a feat that will be hard to repeat with so many headwinds. Although the high single-digit PE is reasonable, with investor sentiment turning, now isn’t the time to buy Samsung.

Changing Allegiances

Apple Inc. (NASDAQ:AAPL) is a big fish to hook for Taiwan Semi, which changes the outlook for that company. Investors should take note. Shifting allegiances, however, should also help Microsoft over the long term. Samsung, meanwhile, looks like its damaged friendships could quickly become a problem.

The article A Tech Giant Reconfigures its Supply Chain originally appeared on Fool.com and is written by Reuben Brewer.

Reuben Brewer has no position in any stocks mentioned. The Motley Fool owns shares of Microsoft. Reuben is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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