CHIPS, WAFERS, AND BATTERIES: TSMC DOMINATES, SILTRONIC STRUGGLES, HPQ SILICON GOES ON THE OFFENSIVE

THE PACEMAKER IN THE ENGINE ROOM: WHY EVERYTHING HANGS ON TSMC

While Nvidia is celebrated in the markets as the flagship of artificial intelligence (AI), forward-thinking investors are turning their attention to the actual engine room of the AI revolution. And there is no getting around Taiwan Semiconductor Manufacturing Company, or TSMC for short. For Jonathan Cofsky, co-portfolio manager of the Global Tech and Innovation Fund at Janus Henderson, the Taiwanese semiconductor giant is "probably the most important company right now for enabling AI." Nearly all leading chip developers have their chips manufactured there. This exceptional position catapulted the company into becoming the first non-US tech firm to surpass the historic milestone of USD 1,000 billion in market capitalization.

The company's first-quarter results demonstrated that the continued optimism among investment professionals is fundamentally well supported. TSMC increased revenue by 40.6% year-over-year to USD 35.9 billion. Profit growth was even more impressive: net income climbed by 58.3%. With an operating margin of 58.1%, the company demonstrates pricing power unprecedented in the hardware sector, driven by its exclusive mastery of state-of-the-art packaging technologies. This refers to the final production step in manufacturing a semiconductor component. The delicate silicon chip is embedded in a package that connects it electrically to the outside world—such as a circuit board—and protects it from external influences like heat, moisture, and impact. The key feature of the Taiwanese company's unique advanced packaging process, known as CoWoS, is that logic chips and ultra-fast memory (HBM—High Bandwidth Memory) can be placed extremely close together on a wafer-thin layer of pure silicon. No other contract manufacturer can replicate this combination of stability and volume with such flawless precision. As a result, CoWoS has become the ultimate bottleneck in the global AI infrastructure.

Yet despite its technological lead and impressive figures, a major "but" looms over the tech giant: geopolitical risk. The latent threat of Chinese aggression against Taiwan endangers the lifeline of the global tech industry. Should a conflict arise, the global AI infrastructure would grind to a halt overnight. It is precisely this vulnerability that has triggered a radical rethink in the West. The US and Europe are attempting, through funding programs worth billions, to gradually shift production to politically safe regions to significantly reduce their risky dependence on the Far East.

POLITICAL VETO, OPERATIONAL BURDEN: THE BITTER LESSON FOR SILTRONIC

The example of Siltronic illustrates just how painful political interventions in the semiconductor value chain can be for investors. Prior to its initial public offering, the TecDAX-listed company was a subsidiary of the long-established Munich-based conglomerate Wacker Chemie—the market leader in high-purity polysilicon, which forms the fundamental basis for semiconductor wafers. In early 2022, the Federal Ministry of Economics issued a last-minute ban on the takeover of Siltronic by its Taiwanese competitor GlobalWafers, a deal worth approximately EUR 4.4 billion that had been considered a done deal. The political dimension was unmistakable: Berlin wanted to keep this key domestic technology in Europe at all costs. For shareholders, this veto marked the beginning of a grueling slump. The share price plummeted from around EUR 140 to the EUR 30 range in a multi-year downtrend that lasted until mid-2025.

Although the share has recovered significantly in the wake of the recent semiconductor boom, the operational problems are far from over. In the first quarter of 2026, Siltronic reported a 17.5% decline in revenue to EUR 306.5 million and a loss of EUR 66.8 million. In addition to high customer inventory levels and persistent price pressure outside of long-term contracts, a strategic legacy weighs particularly heavily. The highly complex and capital-intensive ramp-up of a new, state-of-the-art 300-mm wafer fab in Singapore was massively delayed following the collapsed takeover and has weighed on profitability for years. Given this weak earnings performance, the share is currently trading at around EUR 93.50—still well below GlobalWafers' original takeover offer, which had stood at a substantial EUR 145 per share.

The company underscored in mid-June, through a capital measure, that there is still a long way to go before a fundamental turnaround is achieved. To secure future growth and strengthen its balance sheet, Siltronic issued new shares representing 10% of its share capital. The fact that the private placement was significantly oversubscribed despite the challenging market environment—and that the anchor shareholder, HAL Trust, placed a substantial order—secures the group gross proceeds of EUR 273 million at a placement price of EUR 91.00 per share. However, it also highlights just how immense the ongoing capital requirements are in the Western wafer business to remain technologically competitive at all.

FROM THE LAB TO THE SUPPLY CHAIN: HOW HPQ SILICON IS CHALLENGING ASIA'S MONOPOLIES

While tech giants like TSMC are investing billions in new factories and suppliers like Siltronic are struggling with massive ramp-up costs, a fundamental question is often overlooked in the West: Where will the critical base materials of the future come from? This is where the Canadian cleantech company HPQ Silicon comes into play. Its business model is based on developing disruptive, low-carbon plasma technologies to produce high-tech materials such as silicon anode powder and fumed silica at a drastically lower cost and in a more environmentally friendly way than the competition. While silicon anode powder is primarily used in batteries, fumed silica (also known as Aerosil or HDK)—produced directly from quartz in a specialized reactor—is an indispensable component in many applications: paints and coatings, plastics and adhesives, medications, toothpaste, and cosmetics all contain this ultrafine synthetic powder. It is even used in the food industry as an anti-caking and flow-enhancing agent—for example, in spices to prevent clumping.

A milestone in HPQ's history was the strategic investment in Novacium in 2022. While researchers at the French partner company in Lyon are at the technological forefront of batteries and decentralized hydrogen production, HPQ holds the exclusive marketing rights for the North American market. The dynamic development of this transatlantic partnership is underscored by the recently announced signing of a strategic letter of intent with the French specialist LN Innov. The goal is to evaluate a Canadian production platform for integrated electric drone propulsion systems. Since supply chains for drone technology and high-performance batteries are currently—much like chip manufacturing—extremely concentrated in Asia, HPQ is thus offering a self-sufficient alternative in North America that can be used for both military and civilian applications. Instead of managing dependencies, the Montréal-based company is building tomorrow's supply chains in the West.

However, everything is indeed still in the early stages of development. The most recently reported net income of CAD 35.54 million is attributable to a one-time accounting effect. In December 2025, following an amendment to the shareholders' agreement, HPQ relinquished its veto rights over Novacium and thus formally lost operational control. The required deconsolidation under accounting regulations necessitated a revaluation of the remaining shares and a call option, resulting in a non-cash book gain of CAD 39.31 million. This has no lasting impact on the technology partnership. Through private placements and a convertible bond, the management team led by CEO Bernard Tourillon raised the funds to increase its stake in Novacium to the current 36.8%. The strategic importance of this Western supply chain initiative is evidenced by government backing: the Canadian Ministry of Natural Resources has pledged up to CAD 3 million in funding, and the economic development agency Investissement Québec holds an 8% stake. This makes it the second-largest shareholder after management.

Trillion-Dollar Conglomerate, Turnaround Bet, Penny Stock: Three Stocks, Three Risk Profiles

The price differences alone show that TSMC, Siltronic, and HPQ Silicon are in three completely different leagues. The ADR of the trillion-dollar Taiwanese conglomerate, which is tradable in Germany, is currently listed at EUR 383.00, resulting in a price-to-earnings (P/E) ratio of just over 20 for the coming year. This makes the stock a solid core investment for investors betting on a continuation of the AI and semiconductor boom—the main risk is its location. At its current share price of EUR 93.50, Siltronic has a market capitalization of around EUR 2.8 billion; a P/E ratio cannot be calculated due to expected losses. According to the analyst consensus, the Munich-based company will not return to profitability until 2029, making the stock a turnaround bet for investors with a long-term perspective. With a market capitalization of approximately CAD 75 million and a share price of CAD 0.16 (equivalent to EUR 0.10), HPQ Silicon embodies the classic profile of a "high-risk/high-reward" speculation. Further announcements regarding new orders and progress in monetizing the business model could catapult the share price into entirely new territory in no time.