Bernstein Research's Mark Li , who covers contract chip manufacturer Taiwan Semiconductor ( TSM ), along with competitor United Microelectronics ( UMC ), today cut his price targets and estimates for both companies, and cut his rating on UMC to Underperform from Market Perform, citing " structural changes " in their businesses, including the need for rising capital investments, and the prospect of price competition from Samsung Electronics ( 005930KS ), and Intel ( INTC ), writing, "we believethe share price is yet to reflect the additional structural risk in the next few years." Li, who maintains a Market Perform rating on TSM shares, trimmed his estimates for the two ever so slightly, modeling $1.02 per share in EPS for TSM this year, down a penny, and 14 cents for UMC, down two cents. There is an " arms race " between TSM and UMC and Intel and Samsung's foundries, writes Li, with the result that " capital intensity " is rising for everyone: Some argue the high cost will slow down the industry. We find evidence suggesting the oppositeway. Intel is replicating its process leadership from PC to mobile chips by accelerating processdevelopment now. Samsung also tries to get ahead of TSMC in 20nm roadmap. Not to be left behind, TSMC will increase R&D budget and move the adoption of 3D transistor one year earlier. There clearly is an arms race in technology development ongoing. Li cites as evidence of capital intensity both anecdotal statements by all the players, as well as his own calculations of the millions spent on investment per thousands of wafer starts. He even provides a chart for how this has grown at TSM: