Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Equity Bottom-Up

Hua Hong Semiconductor / Equity Bottom-Up

<ul>
<li>Hong Kong's secular bull market continues this year with record buying from mainland investors through the Southbound Connect platform.</li>
<li>
<a href="https://www.smartkarma.com/entities/aac-technologies-holdings-inc" target="_blank" data-smartkarma-citation="entities:6544:1" rel="noopener">AAC Technologies Holdings (2018 HK)</a> announced a positive profit alert of of 150% increase in profit for 2024.  The AI, phone and auto segments saw value content increases.
</li>
<li>
<a href="https://www.smartkarma.com/entities/hua-hong-semiconductor-ltd" target="_blank" data-smartkarma-citation="entities:7201:1" rel="noopener">Hua Hong Semiconductor (1347 HK)</a> is well-positioned to cater to China's increasing demand for locally designed and produced chips, especially in the EV, smart home appliances and wearables industries.
</li>
</ul>


Hong Kong's secular bull market continues this year with record buying from mainland investors through the Southbound Connect platform.

AAC Technologies Holdings (2018 HK) announced a positive profit alert of of 150% increase in profit for 2024.  The AI, phone and auto segments saw value content increases.


Hua Hong Semiconductor (1347 HK) is well-positioned to cater to China's increasing demand for locally designed and produced chips, especially in the EV, smart home appliances and wearables industries.



BUY/SELL/HOLD: Hong Kong Stock Update (February 20)

Asia and Global Semiconductor and Tech Research

Andrew Lu

TSMC (Taiwan Semiconductor Manufacturing) / Equity Bottom-Up

TSMC (Taiwan Semiconductor Manufacturing)

<ul>
<li>TSMC reiterates 2024 sales y/y growth of 20-25% but revises down 2024 global semiconductor y/y sales from over 10% to 10% and global foundry sales growth from 20% to 15-19%.</li>
<li>
No more Moore's Law: After 3 years ramp up gap between N5-N3, TSMC confirms 10-11 quarters of ramp up gap between N3 and N2 due to longer production cycle.</li>
<li>Driven by stronger digital consumer (33% q/q), HPC (3% q/q), IoT (5% q/q) sales but weaker smartphone IC (-16% q/q), TSMC reports 1Q24 sales decline of only 5% q/q.</li>
</ul>


TSMC reiterates 2024 sales y/y growth of 20-25% but revises down 2024 global semiconductor y/y sales from over 10% to 10% and global foundry sales growth from 20% to 15-19%.

No more Moore's Law: After 3 years ramp up gap between N5-N3, TSMC confirms 10-11 quarters of ramp up gap between N3 and N2 due to longer production cycle.
Driven by stronger digital consumer (33% q/q), HPC (3% q/q), IoT (5% q/q) sales but weaker smartphone IC (-16% q/q), TSMC reports 1Q24 sales decline of only 5% q/q.


What Is TSMC Telling Us About Semi Supply Chain Stories at Its Investor Conference?

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

<ul>
<li>Revenues of US$568.5 million, down 10% sequentially and down 9.7% YoY, at the bottom of the previously guided range.</li>
<li>Net loss of $25.8 million compared to a profit of $7.8 million in the previous quarter and $65.5 million in the year ago period.</li>
<li>With current quarter gross margins in the 2-5% range, HHGrace has flipped from best in class in H123 to the worst in class now.</li>
</ul>


Revenues of US$568.5 million, down 10% sequentially and down 9.7% YoY, at the bottom of the previously guided range.
Net loss of $25.8 million compared to a profit of $7.8 million in the previous quarter and $65.5 million in the year ago period.
With current quarter gross margins in the 2-5% range, HHGrace has flipped from best in class in H123 to the worst in class now.


HHGrace. Yikes! Things Just Got Really Ugly

Technology / Semiconductor / Internet Research

Nicolas Baratte

<ul>
<li>Operating loss in 1Q25 will persist in 2Q25 – I expect throughout 2025. Hua Hong rapid capacity increase is supposedly sold out but D&amp;A is increasing much faster than revenue. </li>
<li>Consensus is not expecting an end-demand slowdown resulting from US import tariffs, or sluggish China domestic consumption. Consensus expects Hua Hong to sell its capacity increase fully. </li>
<li>Given losses in 1H25, Consensus EPS forecast is too high for 2025, probably for 2026 as well. Stock is expensive at 43x 2025 EPS, EPS forecasts looks too high.</li>
</ul>


Operating loss in 1Q25 will persist in 2Q25 – I expect throughout 2025. Hua Hong rapid capacity increase is supposedly sold out but D&amp;A is increasing much faster than revenue. 
Consensus is not expecting an end-demand slowdown resulting from US import tariffs, or sluggish China domestic consumption. Consensus expects Hua Hong to sell its capacity increase fully. 
Given losses in 1H25, Consensus EPS forecast is too high for 2025, probably for 2026 as well. Stock is expensive at 43x 2025 EPS, EPS forecasts looks too high.


Hua Hong: Very Poor Margins to Continue, Operating Losses for Longer

Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Cross Asset Strategy

<ul>
<li>Government stabilisation measures kick in as tariff war starts to bite</li>
<li>Can the HK and China markets continue their bull run as markets dislocate?</li>
<li>Is it time to selectively get back into the Chinese tech sector?</li>
</ul>


Government stabilisation measures kick in as tariff war starts to bite
Can the HK and China markets continue their bull run as markets dislocate?
Is it time to selectively get back into the Chinese tech sector?


Hong Kong Market Strategy - Trade and Portfolio Ideas Amidst the Volatility

China

Hua Hong Semiconductor Limited manufactures semiconductors on 200mm wafers for specialty applications. The Company's products are used in the consumer electronic, communication, computing and industrial, and automotive industries.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Hua Hong Semiconductor (1347 HK)

BUY/SELL/HOLD: Hong Kong Stock Update (February 20)

Mainland investors are buying record amounts in HK during secular bull mkt. AAC Tech reported positive earnings surprise and Hua Hong is rapidly...

David Mudd

What Is TSMC Telling Us About Semi Supply Chain Stories at Its Investor Conference?

What Is TSMC Telling Us About Semi Supply Chain Stories at Its Investor Conference? TSMC revises down 2024 global semi y/y sales from over 10% to...

Andrew Lu

HHGrace. Yikes! Things Just Got Really Ugly

A surprise loss-making Q323, ASPs down ~16% YTD and set to decline further, inventory write-downs and gross margin collapsing to the 2-5% range....

William Keating

Hua Hong: Very Poor Margins to Continue, Operating Losses for Longer

Expect operating losses in 2025 for Hua Hong on rapid capacity increase, increasing D&A outpacing revenue growth. Consensus EPS forecasts are...

Nicolas Baratte

Hong Kong Market Strategy - Trade and Portfolio Ideas Amidst the Volatility

$769 has lagged other rare earth plays but it is now up 100% in two days. We would look to sell half and keep the rest as a free ride. Hard...

Rikki Malik

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

BUY/SELL/HOLD: Hong Kong Stock Update (February 20)

Mainland investors are buying record amounts in HK during secular bull mkt. AAC Tech reported positive earnings surprise and Hua Hong is rapidly...

David Mudd

What Is TSMC Telling Us About Semi Supply Chain Stories at Its Investor Conference?

What Is TSMC Telling Us About Semi Supply Chain Stories at Its Investor Conference? TSMC revises down 2024 global semi y/y sales from over 10% to...

Andrew Lu

HHGrace. Yikes! Things Just Got Really Ugly

A surprise loss-making Q323, ASPs down ~16% YTD and set to decline further, inventory write-downs and gross margin collapsing to the 2-5% range....

William Keating

Hua Hong: Very Poor Margins to Continue, Operating Losses for Longer

​Expect operating losses in 2025 for Hua Hong on rapid capacity increase, increasing D&A outpacing revenue growth. Consensus EPS forecasts are...

Nicolas Baratte

Hong Kong Market Strategy - Trade and Portfolio Ideas Amidst the Volatility

$769 has lagged other rare earth plays but it is now up 100% in two days. We would look to sell half and keep the rest as a free ride. Hard...

Rikki Malik

Expect operating losses in 2025 for Hua Hong on rapid capacity increase, increasing D&A outpacing revenue growth. Consensus EPS forecasts are...