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)

Based on the latest quarterly earnings and forecasts of the top 5 global semiconductor wafer fab equipment (WFE) manufacturers, the sector is on track to grow by ~20% sequentially in 2020. This is a remarkable accomplishment considering the challenges these companies have faced during the year as a result of the global pandemic along with the US-China trade restrictions. Furthermore, assuming there are no surprises through the end of the year, 2020 will set an all time record high for annual WFE revenues. Here's a look in more detail at how the sector is performing.

Based on the latest quarterly earnings and forecasts of the top 5 global semiconductor wafer fab equipment (WFE) manufacturers, the sector is on track to grow by ~20% sequentially in 2020. This is a remarkable accomplishment considering the challenges these companies have faced during the year as a result of the global pandemic along with the US-China trade restrictions. Furthermore, assuming there are no surprises through the end of the year, 2020 will set an all time record high for annual WFE revenues. Here's a look in more detail at how the sector is performing. 

Semiconductor WFE. On Track For ~20% YoY Growth Despite US China Restrictions.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

In our November Strategy book we summarize the basis for our bullish outlook, discuss the deservedly hot topic of value vs. growth. and highlight actionable opportunities within our Manufacturing, Transportation, Materials, Technology, &amp; Consumer Discretionary Sectors.

In our November Strategy book we summarize the basis for our bullish outlook, discuss the deservedly hot topic of value vs. growth. and highlight actionable opportunities within our Manufacturing, Transportation, Materials, Technology, &amp; Consumer Discretionary Sectors.

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

Taiwan Semiconductor (TSMC) / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a> is currently trading at more than 2 standard deviations above its 5yr- and 10yr historical average PE range.  A premium makes sense given a significant improvement in their competitive positioning and being in the early stages of a cyclical upswing given the advent of 5G, which should also accelerate the adoption of Internet-of-Things applications. 
This raises the question as to what a fair valuation multiple for TSMC should be. In this insight I make a comparative valuation by looking at, arguably, the two most important companies in TSMC’s value chain, both dominant in their competitive environments, namely TSMC’s largest supplier <a href="https://www.smartkarma.com/entities/asml-holding-nv" target="_blank" data-smartkarma-citation="entities:21097:1" rel="noopener">ASML Holding NV (ASML NA)</a> and their largest customer <a href="https://www.smartkarma.com/entities/apple-inc" target="_blank" data-smartkarma-citation="entities:666:1" rel="noopener">Apple Inc (AAPL US)</a>. 
My analysis focuses on the companies’ competitive positioning, geographic exposure, customer concentration, growth profile and outlook, cash flow generation, balance sheets, capital allocation and returns on invested capital to assess what a fair relative valuation might look like.

TSMC (2330 TT) is currently trading at more than 2 standard deviations above its 5yr- and 10yr historical average PE range.  A premium makes sense given a significant improvement in their competitive positioning and being in the early stages of a cyclical upswing given the advent of 5G, which should also accelerate the adoption of Internet-of-Things applications. 
This raises the question as to what a fair valuation multiple for TSMC should be. In this insight I make a comparative valuation by looking at, arguably, the two most important companies in TSMC’s value chain, both dominant in their competitive environments, namely TSMC’s largest supplier ASML Holding NV (ASML NA) and their largest customer Apple Inc (AAPL US). 
My analysis focuses on the companies’ competitive positioning, geographic exposure, customer concentration, growth profile and outlook, cash flow generation, balance sheets, capital allocation and returns on invested capital to assess what a fair relative valuation might look like.

In our October 1 Int’l Compass we highlighted our belief that the lows were in place for this recent correction and that, combined with mostly healthy market dynamics, a bullish outlook is appropriate if the MSCI ACWI (ACWI-US) is above $77 support and, if the MSCI EM (EEM-US) is above $42.30 support. These indexes and market dynamics have only improved since October 1. As a result, our outlook remains bullish and we continue to believe that the path of least resistance is higher for global equities. Below we summarize the basis for our bullish outlook. Open the attached file to read our complete International Strategy document, and to find links to detailed comments and recommendations for each of our 12 Sectors.

In our October 1 Int’l Compass we highlighted our belief that the lows were in place for this recent correction and that, combined with mostly healthy market dynamics, a bullish outlook is appropriate if the MSCI ACWI (ACWI-US) is above $77 support and, if the MSCI EM (EEM-US) is above $42.30 support. These indexes and market dynamics have only improved since October 1. As a result, our outlook remains bullish and we continue to believe that the path of least resistance is higher for global equities. Below we summarize the basis for our bullish outlook. Open the attached file to read our complete International Strategy document, and to find links to detailed comments and recommendations for each of our 12 Sectors.

Global Equity Strategy: Bullish Outlook Intact

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Event-Driven

On 11 June, Unilever announced that it was looking to unify its group legal structure under a single parent company, <a href="https://www.smartkarma.com/entities/unilever-plc" target="_blank" data-smartkarma-citation="entities:22197:1" rel="noopener">Unilever PLC (ULVR LN)</a>, "creating a simpler company with greater strategic flexibility, that is better positioned for future success".The Dutch shareholders approved the unification on 21 September with 99.39% of the shares voted in favour, while the UK shareholders approved the proposal on 12 October with over 99% of the shares voted in favour.There is still one potential hurdle to the unification in the Departure Tax (GroenLinks initiative bill) being proposed by the GreenLeft Party in the Netherlands that could cost Unilever up to €11bn if it left the Netherlands.If the unification does go through, there will be an impact of passive fund activity on <a href="https://www.smartkarma.com/entities/unilever-nv" target="_blank" data-smartkarma-citation="entities:21141:1" rel="noopener">Unilever NV (UNA NA)</a>, but the bigger impact will be on <a href="https://www.smartkarma.com/entities/unilever-plc" target="_blank" data-smartkarma-citation="entities:22197:1" rel="noopener">Unilever PLC (ULVR LN)</a>. We estimate the net impact of the unification will see around US$3bn of passive money flow into the stock.In this Insight, we take a look at some of the details around the unification before jumping into the impact on the stocks and the possible spread between the two lines prior to unification.

On 11 June, Unilever announced that it was looking to unify its group legal structure under a single parent company, Unilever PLC (ULVR LN), "creating a simpler company with greater strategic flexibility, that is better positioned for future success".The Dutch shareholders approved the unification on 21 September with 99.39% of the shares voted in favour, while the UK shareholders approved the proposal on 12 October with over 99% of the shares voted in favour.There is still one potential hurdle to the unification in the Departure Tax (GroenLinks initiative bill) being proposed by the GreenLeft Party in the Netherlands that could cost Unilever up to €11bn if it left the Netherlands.If the unification does go through, there will be an impact of passive fund activity on Unilever NV (UNA NA), but the bigger impact will be on Unilever PLC (ULVR LN). We estimate the net impact of the unification will see around US$3bn of passive money flow into the stock.In this Insight, we take a look at some of the details around the unification before jumping into the impact on the stocks and the possible spread between the two lines prior to unification.

Netherlands

ASML Holding N.V. develops, produces, and markets semiconductor manufacturing equipment, specifically machines for the production of chips through lithography. The Company services clients worldwide.

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ASML Holding NV (ASML US)

Semiconductor WFE. On Track For ~20% YoY Growth Despite US China Restrictions.

Despite the double headwinds of COVID-19 and US China trade restrictions, the semiconductor WFE segment is turning in an outstanding performance...

William Keating

U.S. Equity Strategy: Remain Bullish

In our November Strategy book we summarize the basis for our bullish outlook, discuss the deservedly hot topic of value vs. growth. and highlight...

Vermilion Research

TSMC: A Comparative Valuation

In this insight, I make a comparative valuation by looking at two value-chain companies, both dominant in their own right, namely TSMC’s largest...

Wium Malan, CFA

Global Equity Strategy: Bullish Outlook Intact

Read our complete International Strategy document to find detailed comments and recommendations for each of our 12 Sectors.

Vermilion Research

Unilever Unification - Index Impact

With the Unilever unification of the PLC and NV lines approved by the Dutch and British shareholders, we take a look at the spread between the two...

Brian Freitas

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