Pegatron's Tung: TSMC at 20x P/E Is 'Honest and Sincere'

Pegatron Chairman Tung Tzu-hsien has put a hard number on his defense of Taiwan's stock market: TSMC, he calculates, trades at roughly 19 to 21 times earnings, a ratio he calls "very honest and sincere" and "not overvalued at all."

Speaking at the Zero Carbon Sustainability Summit on November 4, Tung backed his case with TSMC's disclosed results. First-three-quarter earnings per share already exceeded NT$70, he noted. Extrapolating proportionally and factoring in the seasonally strong fourth quarter, he estimated full-year EPS of NT$100 to NT$110. Against a recent share price of about NT$2,000 to NT$2,300, that yields the 19-to-21 multiple. Tung stressed these are his own hypothetical estimates built on disclosed earnings, not company guidance.

The arithmetic matters because of TSMC's weight. The foundry accounts for nearly 40% of the Taiwan stock market's total capitalization — just over $2 trillion (about NT$65.6 trillion) of a market worth more than $5 trillion (about NT$164.1 trillion). The benchmark index therefore moves largely with one heavyweight stock.

Why does Tung think the foreign selling is temporary?

Taiwan's market has swung sharply in recent sessions as AI shares pulled back and foreign investors sold. Tung argued the outflows say nothing about industry fundamentals. Some of the departing hot money resembles "nomadic tribes with a speculative streak," grazing wherever the grass is greener — but Taiwan's "grass has always been lush," and the capital will return in search of reliable products and growth.

He pointed out the pressure is not unique to Taiwan. Markets in Japan, South Korea and elsewhere in Asia face similar selling. Short-term funds may pivot to other markets chasing initial public offerings or investment manias — "wherever there is grass, that's where they go" — but once the frenzy fades, the money must seek out regions with dependable products. Tung said Taiwan's competitiveness has not changed, and he would not rule out capital flowing back within two to four weeks.

How broad is Taiwan's demand base?

Tung rejected the idea that Taiwan's technology industry depends entirely on generative AI, which rose to prominence over the past two years. As early as the pandemic, he noted, demand for remote work, remote learning and communications had already driven strong performance in semiconductors and electronic components.

Now, with AI demand heating up, the supply chain benefits across the board:

• Passive components
• Substrates
• Copper clad laminate (CCL)
• Printed circuit boards (PCB)
• Advanced packaging

Tung joked that the only real threat would be "a world that no longer needs technology products." Looking at Beijing, Shanghai, New York and London, he said, modern life is already impossible without them.

He framed Taiwan's position in stark terms. An island of about 23.4 million people and roughly 36,000 square kilometers has produced TSMC — the "sacred mountain that protects the nation" — along with a complete range of "protective mountains" across the technology supply chain.

What did he say about U.S. politics?

Tung also read the ongoing U.S. midterm elections as voters giving a middling grade to Donald Trump's "ever-changing" policies. In his view, impassioned but inconsistent policies have not won voter approval.

His conclusion for Taiwan's industry was steadiness. Trump's policies have been volatile for nearly two years, he said, while Taiwan's economic growth has remained a standout. The industry need only keep its edge and "steadily go its own way," rather than react to tariff threats or the outcome of any single election.

What is the market takeaway?

Tung's remarks offered a measure of support for AI concept stocks under foreign-investor adjustment pressure. By comparing TSMC's P/E with the world's ten largest technology stocks by market value, he sought to show Taiwan valuations are not elevated, and pointed to the complete supply chain — from semiconductors to electronic components — as the foundation for withstanding short-term capital swings.

He conceded one limit: he is no stock market expert. His attitude toward the market, he said, is that "it's best to look at it only once in a long while," because staring at the screen every day easily breeds anxiety. As long as global demand for technology products does not recede, he believes Taiwan's industry still has room to grow, and its future is "quite promising."