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)

In a previous Insight, <a href="https://www.smartkarma.com/insights/automotive-semiconductors-all-you-never-wanted-to-know-but-probably-should-part-1" target="_blank" data-smartkarma-citation="insights:17416">Automotive Semiconductors- All You Never Wanted To Know But Probably Should- Part 1</a>, we provided looked in-depth the "traditional" automotive semiconductor market, noting that it was the fastest growing semiconductor segment in 2017 with a projected CAGR of 7.2% through 2021. However, the automotive semiconductor landscape is changing rapidly and the "traditional" players such as NXP, Infineon, STMicro etc are being joined by the likes of Intel, Cisco, Marvell, Qualcomm, NVIDIA, Samsung &amp; Broadcom- all chasing their share of a market currently valued at around $35 billion annually. What exactly is driving this change (pun intended!)? As we discussed previously, the advent of autonomous driving, the rise of the electric vehicle and the ever-growing impact of government regulations for automotive safety are combining to create a flood of new requirements and opportunities for the semiconductor industry.Central to this rapidly changing environment is the move to automotive Ethernet. The CAN, LIN, MOST &amp; FlexRay system buses traditionally used within cars to channel communications between different sub-systems simply cannot cope with levels of data required for autonomous driving. Furthermore, the complexity of these multiple networks has driven the cost of installing the physical wiring to as much as 50% of the overall labor cost of manufacturing an automobile. The growing adoption of automotive Ethernet has an important consequence- it essentially turns the automobile into a data center on wheels, opening up a whole new market opportunity for the broader semiconductor industry. For example, it greatly simplifies and speeds up delivery of over-the-air (OTA) updates- itself a process which will save the automobile industry billions of dollars in maintenance charges incurred from dealership visits each year.It's not just the physical network that's changing in the automobile- the operating system landscape is also rapidly evolving. While Blackberry's QNX remains the dominant player with greater than 50% market share, Google is chasing it with a customized version of Android while Apple is also rumored to have something in the works. Meanwhile, automotive grade Linux (AGL) is becoming a popular choice. AGL brings with it the benefits of open-source and aligns perfectly with GENIVI, an alliance established to tackle the skyrocketing cost of automotive software which now routinely runs into millions of lines of code. In this Insight, we examine the rapidly changing automotive landscape and introduce the companies who are front and center in making those changes happen.

In a previous Insight, Automotive Semiconductors- All You Never Wanted To Know But Probably Should- Part 1, we provided looked in-depth the "traditional" automotive semiconductor market, noting that it was the fastest growing semiconductor segment in 2017 with a projected CAGR of 7.2% through 2021. However, the automotive semiconductor landscape is changing rapidly and the "traditional" players such as NXP, Infineon, STMicro etc are being joined by the likes of Intel, Cisco, Marvell, Qualcomm, NVIDIA, Samsung &amp; Broadcom- all chasing their share of a market currently valued at around $35 billion annually. What exactly is driving this change (pun intended!)? As we discussed previously, the advent of autonomous driving, the rise of the electric vehicle and the ever-growing impact of government regulations for automotive safety are combining to create a flood of new requirements and opportunities for the semiconductor industry.Central to this rapidly changing environment is the move to automotive Ethernet. The CAN, LIN, MOST &amp; FlexRay system buses traditionally used within cars to channel communications between different sub-systems simply cannot cope with levels of data required for autonomous driving. Furthermore, the complexity of these multiple networks has driven the cost of installing the physical wiring to as much as 50% of the overall labor cost of manufacturing an automobile. The growing adoption of automotive Ethernet has an important consequence- it essentially turns the automobile into a data center on wheels, opening up a whole new market opportunity for the broader semiconductor industry. For example, it greatly simplifies and speeds up delivery of over-the-air (OTA) updates- itself a process which will save the automobile industry billions of dollars in maintenance charges incurred from dealership visits each year.It's not just the physical network that's changing in the automobile- the operating system landscape is also rapidly evolving. While Blackberry's QNX remains the dominant player with greater than 50% market share, Google is chasing it with a customized version of Android while Apple is also rumored to have something in the works. Meanwhile, automotive grade Linux (AGL) is becoming a popular choice. AGL brings with it the benefits of open-source and aligns perfectly with GENIVI, an alliance established to tackle the skyrocketing cost of automotive software which now routinely runs into millions of lines of code. In this Insight, we examine the rapidly changing automotive landscape and introduce the companies who are front and center in making those changes happen.

Automotive Semiconductors - All You Never Wanted To Know But Probably Should - Part 2

Global Automotive Stocks/EV Focus/Event Driven, SC Capital

SC Capital

Global Automotive Stocks/EV Focus/Event Driven

Over 22 years covering Japanese equities on both the sell side and the buy side. 

Bottom-up Japan Equities Research

Equity Bottom-Up

<ul><li>Isuzu's Japanese operations are slightly overshooting targets, while its Thai operations appear to be widely overshooting, contrary to what consensus estimates are seeing. The company's estimates call for a Y21.4bn Q2 OP, while consensus is at Y31bn. Given July to September sales and production in Asia, Q2 OP could surpass Y35bn. </li><li>The Street sees Isuzu's Q2 Asian truck sales growing in the mid-teens on a year-on-year basis, whereas Isuzu's Q2 truck sales in Thailand and Indonesia--Isuzu's largest Asian markets--grew by 33% YoY. </li><li>More importantly, Isuzu's Thai production operations--roughly half of global production capacity--appears to be growing by around 18% YoY in July and August, combined. This doesn't appear to be factored into consensus estimates, despite making up close to half of profits. </li><li>If Isuzu maintains its 2H OP target of Y91bn and simply adds the 1H OP overshoot of around Y15bn, the new full-year target should come to around Y167bn versus current targets of Y152bn and consensus estimates of Y159bn. </li><li>While truck demand in Japan is set to slow down from October after nearly a year of front-loaded demand ahead of last month's exhaust regulation changes for Japanese trucks, Isuzu has much more conservative forecasts for FY17's 2H sales, with an assumption of a -10% YoY decline in volumes, versus a more optimistic outlook at rival Hino, which sees only a -6% fall in the 2H. </li><li>Both Isuzu and Hino face a long-awaited recovery in the Asian emerging markets, but Isuzu's should be more marked, given its larger exposure to the long sagging markets of Thailand and the Middle East, whereas Hino has been largely unscathed by the downturns in these markets. </li><li>Isuzu's valuations are higher than the five year averages, with FY17 PER of 13x above the 5-year average of 10x and the EV/EBITDA of 5.8x higher than the 5-year average of 5.5x. These valuations are also higher than the average FY17 PER of around 9.5x among Japan's top-five car makers, but they face harsher demand conditions in their main markets of the US and China, while Isuzu could be on the cusp of a recovery in its main emerging markets. Compared to Hino (FY17 PER of 14x), Mahindra &amp; Mahindra (FY17 PER of 18x) and Navistar (FYOct-18 PER of 21x), Isuzu trades at a discount despite being more profitable. </li></ul>

Isuzu's Japanese operations are slightly overshooting targets, while its Thai operations appear to be widely overshooting, contrary to what consensus estimates are seeing. The company's estimates call for a Y21.4bn Q2 OP, while consensus is at Y31bn. Given July to September sales and production in Asia, Q2 OP could surpass Y35bn. The Street sees Isuzu's Q2 Asian truck sales growing in the mid-teens on a year-on-year basis, whereas Isuzu's Q2 truck sales in Thailand and Indonesia--Isuzu's largest Asian markets--grew by 33% YoY. More importantly, Isuzu's Thai production operations--roughly half of global production capacity--appears to be growing by around 18% YoY in July and August, combined. This doesn't appear to be factored into consensus estimates, despite making up close to half of profits. If Isuzu maintains its 2H OP target of Y91bn and simply adds the 1H OP overshoot of around Y15bn, the new full-year target should come to around Y167bn versus current targets of Y152bn and consensus estimates of Y159bn. While truck demand in Japan is set to slow down from October after nearly a year of front-loaded demand ahead of last month's exhaust regulation changes for Japanese trucks, Isuzu has much more conservative forecasts for FY17's 2H sales, with an assumption of a -10% YoY decline in volumes, versus a more optimistic outlook at rival Hino, which sees only a -6% fall in the 2H. Both Isuzu and Hino face a long-awaited recovery in the Asian emerging markets, but Isuzu's should be more marked, given its larger exposure to the long sagging markets of Thailand and the Middle East, whereas Hino has been largely unscathed by the downturns in these markets. Isuzu's valuations are higher than the five year averages, with FY17 PER of 13x above the 5-year average of 10x and the EV/EBITDA of 5.8x higher than the 5-year average of 5.5x. These valuations are also higher than the average FY17 PER of around 9.5x among Japan's top-five car makers, but they face harsher demand conditions in their main markets of the US and China, while Isuzu could be on the cusp of a recovery in its main emerging markets. Compared to Hino (FY17 PER of 14x), Mahindra &amp; Mahindra (FY17 PER of 18x) and Navistar (FYOct-18 PER of 21x), Isuzu trades at a discount despite being more profitable. 

Isuzu (7202)--Possibilities of a Q2 Consensus Beat

United States

Navistar International Corporation manufactures and markets medium and heavy trucks, school buses, mid-range diesel engines, and service parts. The Company also provides financial services to its dealers and customers.

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Navistar International (NAV US)

Automotive Semiconductors - All You Never Wanted To Know But Probably Should - Part 2

In a previous Insight, Automotive Semiconductors- All You Never Wanted To Know But Probably Should- Part 1, we provided looked in-depth the...

William Keating

Isuzu (7202)--Possibilities of a Q2 Consensus Beat

Isuzu's Japanese operations are slightly overshooting targets, while its Thai operations appear to be widely overshooting, contrary to what...

SC Capital

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