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

Thematic (Sector/Industry)

<ul>
<li>The current semiconductor market meltdown can be expected to continue through the end of 2024</li>
<li>This will reduce 2022 market growth to 5%, and will drive a decline of 19% in 2023</li>
<li>Stocks will be unevenly influenced by this, with the most dramatic declines hitting makers of volume commodities, smaller declines in differentiated products, and a weak impact on older technology products.</li>
</ul>


The current semiconductor market meltdown can be expected to continue through the end of 2024
This will reduce 2022 market growth to 5%, and will drive a decline of 19% in 2023
Stocks will be unevenly influenced by this, with the most dramatic declines hitting makers of volume commodities, smaller declines in differentiated products, and a weak impact on older technology products.


2023 High Conviction: Semiconductor Down Market

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/renesas-electronics-corp" target="_blank" data-smartkarma-citation="entities:15933:1" rel="noopener">Renesas Electronics (6723 JP)</a> on 8 February 2021 announced that they had signed an agreement to acquire <a href="https://www.smartkarma.com/entities/dialog-semiconductor-plc-664a1f83-2a21-4690-a91f-fb971832e7ad" target="_blank" data-smartkarma-citation="entities:21607:1" rel="noopener">Dialog Semiconductor (DLG GR)</a> for an equity value of €4.9bn. The company on the same day <a href="https://www.renesas.com/eu/en/about/press-room/notice-concerning-filing-shelf-registration-statement-issuance-new-shares" target="_blank" rel="noopener">announced</a> a shelf registration to issue up to ¥270bn of shares to pay for the deal.<section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/211/854/original/Screenshot+2021-06-08+at+10.38.41+AM.png?1623120032" class="editor-image img-responsive" data-smartkarma-image-id="211854"></figure></section>Renesas shares fell on the news, bounced, then fell, and have traded in a range of ¥1,100-1,300/share since then. In the interim (it will take until the end of 2021 to get the Dialog deal past foreign review boards and anti-trust regulators), the company experienced <a href="https://www.renesas.com/eu/en/node/1509341" target="_blank" rel="noopener">a fire at its Naka Factory</a> which will cost a ¥24bn impact in H1, there is an ongoing global chip shortage affecting both semiconductor makers and their customers, and the end of May saw the company finally <a href="https://www.renesas.com/eu/en/about/press-room/renesas-announces-issuance-new-shares-and-secondary-offering-shares" target="_blank" rel="noopener">announce</a> its equity offering - large at nearly US$4bn. This seemed like an overhang, but has ended up not being so much of one.The interim period, while showing a sideways trend for Renesas, saw its Peers outperform dramatically. The announcement of the equity offering and its size looked like it would present significant overhang. It has not turned out to be the case. There has been a "buy the news" reaction. It is a big offering. There are a bunch of moving parts. And lots of index flow.

Renesas Electronics (6723 JP) on 8 February 2021 announced that they had signed an agreement to acquire Dialog Semiconductor (DLG GR) for an equity value of €4.9bn. The company on the same day announced a shelf registration to issue up to ¥270bn of shares to pay for the deal.Renesas shares fell on the news, bounced, then fell, and have traded in a range of ¥1,100-1,300/share since then. In the interim (it will take until the end of 2021 to get the Dialog deal past foreign review boards and anti-trust regulators), the company experienced a fire at its Naka Factory which will cost a ¥24bn impact in H1, there is an ongoing global chip shortage affecting both semiconductor makers and their customers, and the end of May saw the company finally announce its equity offering - large at nearly US$4bn. This seemed like an overhang, but has ended up not being so much of one.The interim period, while showing a sideways trend for Renesas, saw its Peers outperform dramatically. The announcement of the equity offering and its size looked like it would present significant overhang. It has not turned out to be the case. There has been a "buy the news" reaction. It is a big offering. There are a bunch of moving parts. And lots of index flow.

Renesas Equity Offering - Priced To Go With Index Demand Now and Later

Japan/Asia Long-Short, LightStream Research

Mio Kato

Japan/Asia Long-Short

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Automakers are starting to struggle with chip shortages as the Nikkei reports <a href="https://asia.nikkei.com/Business/Automobiles/Global-chip-shortage-threatens-automakers-worldwide" target="_blank" rel="noopener">here</a>, <a href="https://asia.nikkei.com/Business/Automobiles/Nissan-to-cut-car-production-due-to-lack-of-chips" target="_blank" rel="noopener">here</a> and <a href="https://asia.nikkei.com/Business/Automobiles/Honda-cuts-car-production-on-massive-chip-shortage" target="_blank" rel="noopener">here</a>. This is an extension of a broad chip shortage globally as WFH demand, the launch of new consoles, GPUs and CPUs and rapidly recovering auto sales pour some short-term fuel on the long-term fire of expanding electrification and digitalisation. No wonder then that TSMC is up 134% from its March lows, but Renesas is up an even more impressive 248% since its lows of 2020 and could continue to outperform.

Automakers are starting to struggle with chip shortages as the Nikkei reports here, here and here. This is an extension of a broad chip shortage globally as WFH demand, the launch of new consoles, GPUs and CPUs and rapidly recovering auto sales pour some short-term fuel on the long-term fire of expanding electrification and digitalisation. No wonder then that TSMC is up 134% from its March lows, but Renesas is up an even more impressive 248% since its lows of 2020 and could continue to outperform.

Renesas – Auto Chip Shortage Could Drive Further Gains

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

Our outlook remains status quo: we are bullish and we believe the path of least resistance remains higher. In today’s report we highlight attractive Groups and stocks within Technology: Semiconductor, Mid-Cap, Semiconductor Equip., Large/Mid-Cap, Semiconductor Equip., Small-Cap, and Software, Internet.

Our outlook remains status quo: we are bullish and we believe the path of least resistance remains higher. In today’s report we highlight attractive Groups and stocks within Technology: Semiconductor, Mid-Cap, Semiconductor Equip., Large/Mid-Cap, Semiconductor Equip., Small-Cap, and Software, Internet.

U. S. Equity Strategy: Status Quo: Bullish Outlook Intact

Equity Analyst, LightStream Research

Aqila Ali

Equity Analyst

Event-Driven

In December last year, <a href="https://www.smartkarma.com/entities/broadcom-inc" target="_blank" data-smartkarma-citation="entities:998:1" rel="noopener">Broadcom Limited (AVGO US)</a> reported that it wants to sell its wireless chip unit and that it is working with the Credit Suisse Group to find potential buyers for the RF unit, a segment within the wireless chip unit. This comes as the company categorises the unit as non-core, given its change in focus to become a software business (seen as being more lucrative). This insight takes a quick look at the potential buyers of Broadcom’s wireless business and the potential value of the business.
<div style="text-align: center;" class="content-caption">Summary</div>
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 162.95pt;">
Wireless Unit Segments
</td>
<td style="width: 162.95pt;">
Implied Valuation (USD bn)
</td>
<td style="width: 162.95pt;">
Potential Buyers
</td>
</tr>
<tr>
<td style="width: 162.95pt;">
RF
</td>
<td style="width: 162.95pt;">
9.6
</td>
<td style="width: 162.95pt;">
Apple, Qorvo, Skyworks, MACOM, Murata
</td>
</tr>
<tr>
<td style="width: 162.95pt;">
Bluetooth/Wi-Fi Unit
</td>
<td style="width: 162.95pt;">
8.8
</td>
<td style="width: 162.95pt;">
Skyworks, Murata, NXP Semiconductors
</td>
</tr>
<tr>
<td style="width: 162.95pt;">
Touch controller/ Wireless charging
</td>
<td style="width: 162.95pt;">
1.2
</td>
<td style="width: 162.95pt;">
Apple
</td>
</tr>
</tbody>
</table>
<div class="content-remarks">
Source: Company Disclosures, News Articles, CapIQ, LSR
</div>

In December last year, Broadcom Limited (AVGO US) reported that it wants to sell its wireless chip unit and that it is working with the Credit Suisse Group to find potential buyers for the RF unit, a segment within the wireless chip unit. This comes as the company categorises the unit as non-core, given its change in focus to become a software business (seen as being more lucrative). This insight takes a quick look at the potential buyers of Broadcom’s wireless business and the potential value of the business.
Summary




Wireless Unit Segments


Implied Valuation (USD bn)


Potential Buyers




RF


9.6


Apple, Qorvo, Skyworks, MACOM, Murata




Bluetooth/Wi-Fi Unit


8.8


Skyworks, Murata, NXP Semiconductors




Touch controller/ Wireless charging


1.2


Apple





Source: Company Disclosures, News Articles, CapIQ, LSR


Potential Buyers for Broadcom’s Wireless Business Unit

United States

Maxim Integrated Products, Inc. designs, develops, manufactures, and markets a broad range of linear and mixed-signal integrated circuits.  The Company also provides a range of high-frequency design processes and capabilities that can be used in custom design.

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Maxim Integrated Products (MXIM US)

2023 High Conviction: Semiconductor Down Market

What's happening in semiconductors? When will the downturn end? What does this mean to chip stock prices? This Insight provides some concrete...

Jim Handy

Renesas Equity Offering - Priced To Go With Index Demand Now and Later

Renesas will offer up to 373mm shares or what should be ~$4bn of new and used stock. Pricing (with pushing and shoving before) should be 9 June....

Travis Lundy

Renesas – Auto Chip Shortage Could Drive Further Gains

Renesas could continue to outperform despite a 248% rally from its 2020 lows as automotive electrification joins work from home demand to create a...

Mio Kato

U. S. Equity Strategy: Status Quo: Bullish Outlook Intact

Our outlook remains status quo: we are bullish and we believe the path of least resistance remains higher. In today’s report we highlight...

Vermilion Research

Potential Buyers for Broadcom’s Wireless Business Unit

In December last year, Broadcom Limited (AVGO US) reported that it wants to sell its wireless chip unit and that it is working with the Credit...

Aqila Ali

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