Well we want… Taiwan Semiconductor (TSM)… the worlds largest built to order semiconductor foundry… where they make chips for other semiconductor companies… yesterday something really amazing… something fantastic… something quite unbelievable happened… they didn’t cut numbers… they raised numbers… both their sales and margin forecasts… that is how much money they will make after each sale… thanks to a rush of big orders from the Chinese Communists… and also courtesy of a strong dollar… they benefit from a strong dollar.

When chip designers that don’t have their own facilities want their chips made they come to Taiwan Semi… and that includes QualComm Inc. (QCOM*), NVIDIA Corporation (NVDA), Broadcom Corp. (BRCM), Marvell Technology Group Ltd. (MRVL)… and now they even have a deal with Intel… what makes me think that we have bottomed and this one is coming back because there has been so many false bottoms… how about cold hard facts… first, the key leading indicator of Taiwan’s economy just turned up after being down for months… that is a great sign… because the place, I am not going to call it a country… because like Richard Nixon, and my friend buddy pal Join Lei, I believe in one China… but whatever you call it this island is computer heaven… where many parts for your PC’s, TV’s, and cell phones are made.

Second, semiconductor companies are kind of like retailers… when they have too much inventory they slice prices… when they have a shortage they can raise prices… inventories got real lean in the semiconductors business in December, at least for Taiwan Semi… and now demand, at last, is overwhelming supply so the prices go up… because Taiwan Semi is the most efficient in the business and more focused on profits than its competitors… it can turn around production and deliver the product to the consumer faster than any one else… in other words, TSM can meet the demand as it comes at them and their numbers could skyrocket as a result...

Taiwan Semi preannouncement yesterday where they cited the rush in orders is a sure sign that their customers also cut inventories too far… they cut back too far… Nvidia, Marvel, Omnivision… with the rest of the orders coming from China… that is 3G cell phone demand, it is enormous there… remember China is spending $41b of stimulus money solely building out their fancy wireless tech… and they are spending a ton more there… because the Chinese want to spur consumer demand… do you know that they are putting coupons in peoples pockets that can only be redeemed by buying not saving… thank you for Erin Burnett for picking that up… we out to try that, don’t you think… if only our country were run a little bit more like the rapacious, capitalist Chinese...

Where is the demand coming from in the People’s Republic… and by the way, I am not talking about Cambridge… LG display is expecting more than a 50% increase in LCD TV panels in shipments to China this year… that is amazing because the rest of the world is cutting back… Chinese government is offering a 13% rebated to people in rural areas who buy PC’s… how is that for stimulus… I mean like the Chinese are undercutting Circuit City’s liquidation sale… and Cenex Technologies, the largest distributor of IT and consumer electronic products in Taiwan, they expect sales of PC’s and peripherals in China, the other stuff that goes with PC’s, to increase considerably between now and May because of these government subsidy programs… Cenex is good news for Taiwan Semi… there is a real case to be made here.

Alright, so what do they make… the product breakdown is 42% chips for communications, 32% for computers, 19% for consumer electronics… Taiwan Semi just signed a big deal with Intel to collaborate with Atom, that is Intel’s ultra small system on chip microprocessor, it is really tiny… and that is for smart phones, handsets, and consumer electronics… these are markets that Intel has had trouble penetrating so it is letting Taiwan Semi build the chips in order to take a short cut into the huge volume embedded in the consumer electronic market… Taiwan Semi meanwhile gets a great new customer and a new book of business… Intel has went from being a competitor to a customer… I am an Intel-aholoic, I have been to a lot of plants when they open for Intel.. this is quite a change for them to use this factor.

How about evaluation… it looks real expensive 27 times earnings… I know, that normally freaks me out… but it is the wrong metric… we need to look back to the previous down cycle… tech bust for 2001... Taiwan Semi trades at 3 times price to book value… and remember, it is a factory so that does matter… and that is close to 2001 levels, when utilization rates, margins, return on investment capital, and return on equity were all similar… but since 2001 we have seen a massive industry consolidation… so I think that Taiwan Semi is going to do even better than last time… in other words, the last time that it got to these evaluations it just took off… this time should be similar… we have got real orders… not just like hedge funds trying to find something in tech to buy… although, at this point you will be ahead of the big money if you act tomorrow… the stock is roughly fat for the year… it started at $8.31, it fell $5.83, and it is back $8.66... it has $1.41 in cash, and it has a accidentally high notoriously B.I.G. juicy yield of 4.5%… a tech stock with a 4.5% yield… yes, you can believe it.

Now look, of course, we would like it to prefer till it goes back to $7... but there is nothing wrong with putting a quarter of your share on tomorrow, okay… and then buying 25 shares on the way down, if you are trying to buy 100... sure, I absolutely wish that I had caught the bottom… but, frankly, I am not that smart… I didn’t anticipate the order turn… and in this case, I still believe that it is better to be late than never.

Here is the bottom line…