Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Equity Bottom-Up

Taiwan Semiconductor (TSMC) - ADR / Equity Bottom-Up

<ul>
<li>The US Commerce Department is likely to expand China restrictions for the sale of chips and chip manufacturing equipment.</li>
<li>Impact for major Taiwan-listed suppliers appears minimal so far; Inventec is one name with potential exposure.</li>
<li>Not Made in China: More signs of shift as Tata is preparing a JV with Wistron to produce iPhones and Taiwanese companies look to Southeast Asia and the USA.</li>
</ul>


The US Commerce Department is likely to expand China restrictions for the sale of chips and chip manufacturing equipment.
Impact for major Taiwan-listed suppliers appears minimal so far; Inventec is one name with potential exposure.
Not Made in China: More signs of shift as Tata is preparing a JV with Wistron to produce iPhones and Taiwanese companies look to Southeast Asia and the USA.


Taiwan Tech Weekly: US Restrictions on Tech Sales to China to Expand

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)

On October 4'th last week, Bloomberg published an <a href="https://www.bloomberg.com/news/features/2018-10-04/the-big-hack-how-china-used-a-tiny-chip-to-infiltrate-america-s-top-companies" target="_blank">article</a> alleging that server motherboards manufactured in China by US-headquartered <a href="https://www.smartkarma.com/entities/7921" target="_blank" data-smartkarma-citation="entities:7921:1">Super Micro Computer</a>, had been compromised by agents acting on behalf of the Chinese government and that the those components found their way into the data centers of high profile clients such as <a href="https://www.smartkarma.com/entities/666" target="_blank" data-smartkarma-citation="entities:666:1">Apple</a> and <a href="https://www.smartkarma.com/entities/409" target="_blank" data-smartkarma-citation="entities:409:1">Amazon</a>. Supermicro, whose stock was delisted from the NASDAQ earlier this month due to accounting irregularities and currently trades OTC, went into freefall with its share price collapsing from $21.40 at the open to a low of $8.59 during midday trading. While Supermicro has since recovered slightly to close at $12.40 on October 5't'h, the revelations triggered a broad sell-off in the technology sector has now persisted for two consecutive days. Asian markets were also not immune, with HK-listed Lenovo down some 25% at one stage the following day on fears of its exposure due to its China-based server manufacturing operations. While the Bloomberg report is both comprehensive and compelling, its claims have been robustly denied Apple, Amazon and Supermicro. In our opinion, while Bloomberg may well have uncovered some disturbing evidence of Chinese cybersecurity activities, we find their conclusions highly suspect on multiple fronts. Firstly, a chip of the complexity required to implement the alleged spy functions would require a minimum of 32 pins and could not be mounted on the motherboard without a complete redesign of the board, something that would be impossible to disguise. Secondly, Supermicro's servers are vulnerable, but by virtue of their own sub-standard security rather than as a result of an elaborate hardware hack of immense complexity and risk. In a nutshell, Chinese hackers did not need to infiltrate Supermicro's supply chain in order to gain backdoor access to their servers. The door was already open with a welcome sign hanging outside. Sorry Bloomberg - you appear to have gotten it wrong!

On October 4'th last week, Bloomberg published an article alleging that server motherboards manufactured in China by US-headquartered Super Micro Computer, had been compromised by agents acting on behalf of the Chinese government and that the those components found their way into the data centers of high profile clients such as Apple and Amazon. Supermicro, whose stock was delisted from the NASDAQ earlier this month due to accounting irregularities and currently trades OTC, went into freefall with its share price collapsing from $21.40 at the open to a low of $8.59 during midday trading. While Supermicro has since recovered slightly to close at $12.40 on October 5't'h, the revelations triggered a broad sell-off in the technology sector has now persisted for two consecutive days. Asian markets were also not immune, with HK-listed Lenovo down some 25% at one stage the following day on fears of its exposure due to its China-based server manufacturing operations. While the Bloomberg report is both comprehensive and compelling, its claims have been robustly denied Apple, Amazon and Supermicro. In our opinion, while Bloomberg may well have uncovered some disturbing evidence of Chinese cybersecurity activities, we find their conclusions highly suspect on multiple fronts. Firstly, a chip of the complexity required to implement the alleged spy functions would require a minimum of 32 pins and could not be mounted on the motherboard without a complete redesign of the board, something that would be impossible to disguise. Secondly, Supermicro's servers are vulnerable, but by virtue of their own sub-standard security rather than as a result of an elaborate hardware hack of immense complexity and risk. In a nutshell, Chinese hackers did not need to infiltrate Supermicro's supply chain in order to gain backdoor access to their servers. The door was already open with a welcome sign hanging outside. Sorry Bloomberg - you appear to have gotten it wrong!

SuperMicro China Hack. Bloomberg's Got It Wrong!

United States

Super Micro Computer, Inc. designs, develops, manufactures and sells server solutions based on modular and open-standard x86 architecture. The Company's products include servers, motherboards, chassis, and accessories.

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

Super Micro Computer (SMCI US)

Taiwan Tech Weekly: US Restrictions on Tech Sales to China to Expand

Also more signs of shift as Tata is preparing a JV with Wistron to produce iPhones and Taiwanese companies look to Southeast Asia and the USA.

Vincent Fernando, CFA

SuperMicro China Hack. Bloomberg's Got It Wrong!

On October 4'th last week, Bloomberg published an article alleging that server motherboards manufactured in China by US-headquartered Super Micro...

William Keating

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)