Asia and Global Semiconductor and Tech Research

Andrew Lu

Equity Bottom-Up

<ul>
<li>Post 35% price gain in a quarter, many good news we expected and other analysts expected already factored into the share price. We believe the risk/reward not attractive here.</li>
<li>TSMC guides stronger 1Q24 and 2024, helped by Nvidia and copy cat AI GPU/ASIC orders. We see greater opportunities for alternative copy cat solutions like AMD and Alchip.</li>
<li>We attribute Nvidia customers' sales discrepancy to AI server is cannibalizing non-AI server and Nvidia is allocating more GPUs to premium price paying customers in 1H24 and reverse in 2H24.</li>
</ul>


Post 35% price gain in a quarter, many good news we expected and other analysts expected already factored into the share price. We believe the risk/reward not attractive here.
TSMC guides stronger 1Q24 and 2024, helped by Nvidia and copy cat AI GPU/ASIC orders. We see greater opportunities for alternative copy cat solutions like AMD and Alchip.
We attribute Nvidia customers' sales discrepancy to AI server is cannibalizing non-AI server and Nvidia is allocating more GPUs to premium price paying customers in 1H24 and reverse in 2H24.


From Nvidia Results to See Supply Chain Stories?

<ul>
<li>Blended ASP of decline of 1% q/q in the past two quarters in 2H23, better than 3-10% q/q decline during 3Q22-2Q23, resulting in Tesla's blended ASP decline to decelerate. </li>
<li>Due to Tesla's cost cutting efforts with nice inventory control, we calculates profits/EV rebounded nicely by 21% q/q to US$3,490 per EV in 4Q23, much nicer than no profits.</li>
<li>Good improvement on its FSD Beta version 12.1.2 lately might become a pure profits/EV boost by incremental subscription of US$10,000-15,000 per EV or monthly fee by existing Tesla owners.</li>
</ul>


Blended ASP of decline of 1% q/q in the past two quarters in 2H23, better than 3-10% q/q decline during 3Q22-2Q23, resulting in Tesla's blended ASP decline to decelerate. 
Due to Tesla's cost cutting efforts with nice inventory control, we calculates profits/EV rebounded nicely by 21% q/q to US$3,490 per EV in 4Q23, much nicer than no profits.
Good improvement on its FSD Beta version 12.1.2 lately might become a pure profits/EV boost by incremental subscription of US$10,000-15,000 per EV or monthly fee by existing Tesla owners.


Good Entry Point as Tesla Stabilizes Its 4Q23 Asp and Profits Per EV

Thematic (Sector/Industry)

<ul>
<li>After our global server market model update, we see 3Q23 server market decline and data center vendors' capex cut not consistent with Nvidia's robust y/y sales growth of over 200%;</li>
<li>Discrepancy: 1. Nvidia gaining value on AI server, losing zero on non AI; 2. AI servers grow at the expenses of non AI; 3. most vendors not only in server;</li>
<li>Different from  consensus view, we expect general (non AI) server market to decline 16% y/y in 2024 and 29% in 2025 and suggest to avoid general server supply chain vendors.</li>
</ul>


After our global server market model update, we see 3Q23 server market decline and data center vendors' capex cut not consistent with Nvidia's robust y/y sales growth of over 200%;
Discrepancy: 1. Nvidia gaining value on AI server, losing zero on non AI; 2. AI servers grow at the expenses of non AI; 3. most vendors not only in server;
Different from  consensus view, we expect general (non AI) server market to decline 16% y/y in 2024 and 29% in 2025 and suggest to avoid general server supply chain vendors.


What to Avoid if AI Server Will Continue to Squeeze General Server Market in 2024-2025?

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

<ul>
<li>The percentage of Global funds invested in Taiwan hits an all-time high of 57.8%.</li>
<li>Taiwan has been a key beneficiary of manager rotation alongside India, Argentina and South Korea over the last 6-months.</li>
<li>TSMC is the dominant stock holding, with 49.8% of funds holding a position and has hit record ownership among Global funds.</li>
</ul>


The percentage of Global funds invested in Taiwan hits an all-time high of 57.8%.
Taiwan has been a key beneficiary of manager rotation alongside India, Argentina and South Korea over the last 6-months.
TSMC is the dominant stock holding, with 49.8% of funds holding a position and has hit record ownership among Global funds.


<ul>
<li>Like other automotive/industrial semi vendors, Diodes guides 4Q23 sales of 20% q/q and 35% y/y decline (miss by 21%) and weaker gross margin/operating margin of 35%/7% (miss by 5ppts).</li>
<li>The company sees 4Q23 sales decline of 20% mainly from 19% of automotive and 26% of industrial customers due to customer inventory cut coupled with year-end distributor inventory management. </li>
<li>We expect this adjustment for automotive/industrial IDMs to last for at least 6 months and suggest our clients to avoid these names unless valuation becoming attractive.  </li>
</ul>


Like other automotive/industrial semi vendors, Diodes guides 4Q23 sales of 20% q/q and 35% y/y decline (miss by 21%) and weaker gross margin/operating margin of 35%/7% (miss by 5ppts).
The company sees 4Q23 sales decline of 20% mainly from 19% of automotive and 26% of industrial customers due to customer inventory cut coupled with year-end distributor inventory management. 
We expect this adjustment for automotive/industrial IDMs to last for at least 6 months and suggest our clients to avoid these names unless valuation becoming attractive.  


With No Surprise, Diodes Guides Automotive/Industrial Semi Demand to Fall over 20% Q/Q

Taiwan

Taiwan Semiconductor Manufacturing Company, Ltd. manufactures and markets integrated circuits. The Company provides the following services: wafer manufacturing, wafer probing, assembly and testing, mask production, and design services. TSMC's ICs are used in computer, communication, consumer electronics, automotive, and industrial equipment industries.

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Taiwan Semiconductor (TSMC) (2330 TT)

From Nvidia Results to See Supply Chain Stories?

From Nvidia Results to See Supply Chain Stories? Post 35% price gain in a quarter, many good news already factored into the share price. We...

Andrew Lu

Good Entry Point as Tesla Stabilizes Its 4Q23 Asp and Profits Per EV

Good Entry Point as Tesla Stabilizes Its 4Q23 Asp and Profits Per EV. Due to pricing stability and Tesla's cost cutting efforts, profits/EV...

Andrew Lu

What to Avoid if AI Server Will Continue to Squeeze General Server Market in 2024-2025?

Names to Avoid if AI Server Will Continue to Squeeze General Server Market in 2024-2025? Different from consensus, we expect non AI server market...

Andrew Lu

Taiwan: Underowned, Yet Gaining on Peers

Taiwan hits record levels of exposure among actively managed Global equity funds, yet it still lags behind its counterparts in the USA and Europe.

Steven Holden

With No Surprise, Diodes Guides Automotive/Industrial Semi Demand to Fall over 20% Q/Q

With No Surprise, Diodes Guides Automotive/Industrial Semi Demand to Fall over 20% Q/Q, margin contraction, and rising months of inventory. We see...

Andrew Lu

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