Intel Corporation (INTC), Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (TSM): Technology Stocks to Consider

The mobile sector is becoming ever more competitive for ARM, as Intel continuously advances over different aspects of the industry. Hence, the firm’s IP model is increasingly losing leverage over the high-end smartphone market. In turn, as giant competitor Intel develops its own technology, entry price will cease to be an obstacle. Also, as its licenses drop, operating margins will become razor thin and R&D hard to maintain.

On the financial side, ARM Holdings plc (ADR) (NASDAQ:ARMH) has a spotless balance sheet. Very small capital investments made for great returns and no debt. Cash continues to flow, but levels have lately taken a hit and should keep management busy. Lastly, the company is not known for rewarding shareholders, and yield (0.52%) are low when compared to industry peers.

Royalties have provided ARM with great liquidity, and helped it to keep Intel at bay. Hence, the company has become very dependent on R&D to remain on the technological frontier. However, the stock has greatly depreciated. It is recommended to hold since Intel is considerably raising competitiveness and stress over ARM.

Processors vs. foundries

Intel and Taiwan Semiconductor produce different goods. For the same reason, they are not direct competitors. Nevertheless, Intel is looking to enter Taiwan Semiconductor Mfg. Co. Ltd. (ADR) (NYSE:TSM)’s market and they will be competitors in the long-term. I prefer Intel given its higher yield (3.72%).

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

The article 3 Technology Stocks to Consider originally appeared on Fool.com and is written by Damian Illia.

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