IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

Kioxia Holdings  / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/kioxia" target="_blank" data-smartkarma-citation="entities:29243:1" rel="noopener">Kioxia (6600 JP)</a> is the world’s second-largest player in the NAND flash memory market. Kioxia was spun off from <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> and acquired by KK Pangea, a special purpose company formed by a consortium led by Bain Capital for JPY2 trillion ($18 billion). Kioxia announced a tentative price range of JPY2,800-3,500 a share, materially below the JPY3,960 indicative price announced in August. The shares will list on the Tokyo Stock Exchange on 6 October. In <a href="https://www.smartkarma.com/insights/kioxia-ipo-initiation-not-just-a-flash-in-the-pan" target="_blank" rel="noopener">our initiation note</a>, we stated that for investors willing to play the cycle, we think that Kioxia's fundamentals offer more positives than negatives. However, lead indicators suggest that NAND demand particularly in servers has considerably weakened since August. Also, Kioxia warned that the recent US restrictions on <a href="https://www.smartkarma.com/entities/huawei-technologies-co-ltd" target="_blank" data-smartkarma-citation="entities:8231:1" rel="noopener">Huawei Technology (40978Z CH)</a> may have an impact on the business. For more details, we direct readers to the panel discussion in <a href="https://www.smartkarma.com/insights/smartkarma-flash-webinar-kioxia-ipo-how-solid-is-it" target="_blank" data-smartkarma-citation="insights:43475" rel="noopener">Smartkarma Flash Webinar | Kioxia IPO: How Solid Is It?</a>.  <div class="content-highlight">As the memory business is infamously volatile, we value Kioxia on through-cycle earnings number. Our analysis suggests that Kioxia trades at a substantial premium to peers' through-cycle multiples at the IPO price range. Consequently, while the fundamentals are attractive, we would give the IPO a pass due to the rich valuation. </div>

Kioxia (6600 JP) is the world’s second-largest player in the NAND flash memory market. Kioxia was spun off from Toshiba Corp (6502 JP) and acquired by KK Pangea, a special purpose company formed by a consortium led by Bain Capital for JPY2 trillion ($18 billion). Kioxia announced a tentative price range of JPY2,800-3,500 a share, materially below the JPY3,960 indicative price announced in August. The shares will list on the Tokyo Stock Exchange on 6 October. In our initiation note, we stated that for investors willing to play the cycle, we think that Kioxia's fundamentals offer more positives than negatives. However, lead indicators suggest that NAND demand particularly in servers has considerably weakened since August. Also, Kioxia warned that the recent US restrictions on Huawei Technology (40978Z CH) may have an impact on the business. For more details, we direct readers to the panel discussion in Smartkarma Flash Webinar | Kioxia IPO: How Solid Is It?.  As the memory business is infamously volatile, we value Kioxia on through-cycle earnings number. Our analysis suggests that Kioxia trades at a substantial premium to peers' through-cycle multiples at the IPO price range. Consequently, while the fundamentals are attractive, we would give the IPO a pass due to the rich valuation. 

Semiconductor & Technology Specialist, Ingenuity

William Keating

Semiconductor & Technology Specialist

Ingenuity

Our focus is exclusively on in-depth research & consulting in the broader semiconductor industry. We focus on the key players, namely Intel, Micron, Qualcomm, Apple, Samsung, NVIDIA, AMD, TSMC & Global Foundries - as well as some of the lesser known, but nonetheless critical, companies such as ASML (for EUV), Mellanox, Cavium, Xilinx etc. We specialise in their products, roadmaps, process technologies, competitive advantages & threats etc. We also help our clients understand the implications of new and emerging technologies, e.g. 3D X-Point, 3D NAND, Carbon Nanotubes, Autonomous Driving, Graphene, Silicon Photonics, Wafer-Level Optics, Artificial Intelligence, FPGA, GPU, ASIC etc. 

Semiconductor Analysis & Research

Thematic (Sector/Industry)

The spread of the global pandemic has resulted in the strongest two consecutive quarters on record for server sales and led to <a href="https://www.smartkarma.com/entities/intel-corp" target="_blank" data-smartkarma-citation="entities:16764:1" rel="noopener">Intel</a> beating its second quarter forecast by nearly one billion dollars. This strength in server has spilled over to the DRAM and NAND segments with both staging robust recoveries from the protracted down cycle experienced in 2019. That situation may be coming to an abrupt end however. A key leading indicator suggests that server sales will fall sharply in the coming months. We also expect both DRAM and NAND prices to follow suit. Here's why.

The spread of the global pandemic has resulted in the strongest two consecutive quarters on record for server sales and led to Intel beating its second quarter forecast by nearly one billion dollars. This strength in server has spilled over to the DRAM and NAND segments with both staging robust recoveries from the protracted down cycle experienced in 2019. That situation may be coming to an abrupt end however. A key leading indicator suggests that server sales will fall sharply in the coming months. We also expect both DRAM and NAND prices to follow suit. Here's why.   

Server CPU, DRAM, NAND Sales Heading For A Significant Decline As Inventory Digestion Commences.

Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

The Semiconductor Industry Association's monthly statistics update, covering July's semiconductor sales, show revenues that continue to follow the growth trend of the past 25 years.  This Smartkarma Insight uses graphics to show that the market is still in good health despite 2020's challenging circumstances.

The Semiconductor Industry Association's monthly statistics update, covering July's semiconductor sales, show revenues that continue to follow the growth trend of the past 25 years.  This Smartkarma Insight uses graphics to show that the market is still in good health despite 2020's challenging circumstances.

This Smartkarma Insight examines recent spot market price trends for NAND flash and DRAM chips, which are indicators of the health of the semiconductor market as a whole.  These prices suggest that NAND and DRAM prices could fall by 20% in the near term and continue their descent through the end of the year.

This Smartkarma Insight examines recent spot market price trends for NAND flash and DRAM chips, which are indicators of the health of the semiconductor market as a whole.  These prices suggest that NAND and DRAM prices could fall by 20% in the near term and continue their descent through the end of the year.

DRAM & NAND Spot Prices Indicate Impending Fall

Equity Bottom-Up

The much-anticipated acquisition by <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" data-smartkarma-citation="entities:5891:1" rel="noopener">NVIDIA</a> of <a href="https://www.smartkarma.com/entities/arm-holdings-plc" target="_blank" data-smartkarma-citation="entities:21816:1" rel="noopener">Arm</a> from <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank</a> was formally <a href="https://nvidianews.nvidia.com/news/nvidia-to-acquire-arm-for-40-billion-creating-worlds-premier-computing-company-for-the-age-of-ai" target="_blank" rel="noopener">announced</a> on Monday. The transaction is valued at $40 billion, an approximately equal combination of cash and NVIDIA stock.On the surface the deal looks strategically solid from NVIDIA's perspective. It places the company at the center of Arm's one hundred and eighty billion connected device ecosystem. Perhaps even more importantly, it opens up the possibility of an outright assault on <a href="https://www.smartkarma.com/entities/intel-corp" target="_blank" data-smartkarma-citation="entities:16764:1" rel="noopener">Intel's</a> data center dominance by adding Arm-based server processors to complement NVIDIA's existing lineup of GPUs and interconnect.Underneath the surface however, this deal is fraught with issues and risks. While Arm has been a very successful company, their growth is flatlining as smartphone sales stagnate. Furthermore, we see the rise of RISC-V as a very real threat to Arm's business model in the coming years. Arm has never competed with its customers. Under NVIDIA ownership, this will be virtually impossible to avoid.From a regulatory perspective, Arm IP moving under american ownership will raise the very real prospect that this technology will become a future weapon in the US-China trade and technology wars. In today's environment, it's difficult to see why China would agree to facilitate that possibility.All in all we think this deal is not as good as it seems on the surface and that it will be practically impossible to get through the regulatory approval process.

The much-anticipated acquisition by NVIDIA of Arm from Softbank was formally announced on Monday. The transaction is valued at $40 billion, an approximately equal combination of cash and NVIDIA stock.On the surface the deal looks strategically solid from NVIDIA's perspective. It places the company at the center of Arm's one hundred and eighty billion connected device ecosystem. Perhaps even more importantly, it opens up the possibility of an outright assault on Intel's data center dominance by adding Arm-based server processors to complement NVIDIA's existing lineup of GPUs and interconnect.Underneath the surface however, this deal is fraught with issues and risks. While Arm has been a very successful company, their growth is flatlining as smartphone sales stagnate. Furthermore, we see the rise of RISC-V as a very real threat to Arm's business model in the coming years. Arm has never competed with its customers. Under NVIDIA ownership, this will be virtually impossible to avoid.From a regulatory perspective, Arm IP moving under american ownership will raise the very real prospect that this technology will become a future weapon in the US-China trade and technology wars. In today's environment, it's difficult to see why China would agree to facilitate that possibility.All in all we think this deal is not as good as it seems on the surface and that it will be practically impossible to get through the regulatory approval process. 

NVIDIA+Arm. Strategically Solid But Practically Impossible.

South Korea

Samsung Electronics Co., Ltd. manufactures a wide range of consumer and industrial electronic equipment and products such as semiconductors, personal computers, peripherals, monitors, televisions, and home appliances including air conditioners and microwave ovens. The Company also produces Internet access network systems and telecommunications equipment including mobile phones.

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Samsung Electronics (005930 KS)

Kioxia IPO: Valuation Insights

Kioxia (6600 JP) is the world’s second-largest player in the NAND flash memory market. TMC was spun off from Toshiba Corp (6502 JP) and acquired by...

Arun George

Server CPU, DRAM, NAND Sales Heading For A Significant Decline As Inventory Digestion Commences.

A leading indicator for server sales

William Keating

SIA July Stats Still Show Strength

The Semiconductor Industry Association's

Jim Handy

DRAM & NAND Spot Prices Indicate Impending Fall

This Smartkarma Insight e

Jim Handy

NVIDIA+Arm. Strategically Solid But Practically Impossible.

The long-anticipated acquisition by NVIDIA of Arm Holdings (ARM LN)

William Keating

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