UPDATE: HSBC Upgraded Taiwan Semiconductor Manufacturing Company to Overweight

In a report published Thursday, HSBC Global Research Analyst Steven Pelayo upgraded

from Neutral to Overweight as excess inventories clear. TSMC posted a rise in 3Q net profit yesterday which surged 5.2% to $51.95B New Taiwan dollars ($1.77 billion). Revenue also gained 15% from NT$141.38B to NT$162.58B. Taiwan Semiconductor Manufacturing Company's gross margin came in at 48.5% in the quarter. In the note, HSBC commented, "We look to 2014 where we forecast: 1) continued dominance in 28nm (now shifting to more advanced high-k metal gate where TSMC is sustaining ~90% market share; and 2) the very steep ramp in 20nm (fastest in company's history thanks to Apple)." Pelayo forecasted 2014 revenue to increase 20% YoY versus consensus at 15% with the “Appleeffect” 20nm node contributing to half the growth. The analyst reminded investors of possible risks associated with lackluster demand and an eventual slowdown in smartphone growth. TSM shares closed at 18.91 yesterday and is currently trading at +1.39%.