Taiwan Tech Focused Senior Analyst

Patrick Liao

Equity Bottom-Up

Novatek Microelectronics Corp / Equity Bottom-Up

<ul>
<li>Novatek's revenue was NT$36.512bn in 1Q22, which was 38.5% YoY and 62.6% QoQ. It was 50.73%/36.73%/30.5% GM/OPM/NM in 1Q22, which was higher than our prior expectation of 43.6%/27.3%/22.3% in GM/OPM/NM.   </li>
<li>In our views, we revise up to be revenue/GM as NT$38.7bn/50.98% in 2Q20.</li>
<li>As the inflation, 5G, Russia-Ukraine war did change the landscape, the outlook seems not that so much worse in 2022.</li>
</ul>


Novatek's revenue was NT$36.512bn in 1Q22, which was 38.5% YoY and 62.6% QoQ. It was 50.73%/36.73%/30.5% GM/OPM/NM in 1Q22, which was higher than our prior expectation of 43.6%/27.3%/22.3% in GM/OPM/NM.   
In our views, we revise up to be revenue/GM as NT$38.7bn/50.98% in 2Q20.
As the inflation, 5G, Russia-Ukraine war did change the landscape, the outlook seems not that so much worse in 2022.


Novatek (3034.TT): 1Q22 Results/ 2Q22 Outlook- The Outlook Seems Better than Feared in 2022. .

<ul>
<li>Novatek’s monthly revenue is increasing above 20% YoY from July 2020.  However, the growth trend seems slowing down from 1Q22.</li>
<li>The price for DDIC (Display Driver IC) is the lowest among in the foundry companies’ products although its demand quantity can be large, which gives its actual price bargaining power.</li>
<li>Somehow, the end demand still needs a Display with related ICs for the application. So, there must be some certain suppliers to complete the supply chain.</li>
</ul>


Novatek’s monthly revenue is increasing above 20% YoY from July 2020.  However, the growth trend seems slowing down from 1Q22.
The price for DDIC (Display Driver IC) is the lowest among in the foundry companies’ products although its demand quantity can be large, which gives its actual price bargaining power.
Somehow, the end demand still needs a Display with related ICs for the application. So, there must be some certain suppliers to complete the supply chain.


Novatek (3034.TT): The Growth Trend Seems Slowing Down Since 1Q22.

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

China managers are losing faith in <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK).</a> From peak ownership of 32.5% of funds back in December 2020, active China managers have closed positions in <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> en masse.  Average holding weights have dropped from 0.77% to 0.37% over the same period, with the net underweight rising to -1.17%.This leaves sentiment in <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a>  among the worst in the China universe at present.Analysis taken from our China research, which covers 116 active China managers with combined AUM of $68bn

China managers are losing faith in Xiaomi Corp (1810 HK). From peak ownership of 32.5% of funds back in December 2020, active China managers have closed positions in Xiaomi Corp (1810 HK) en masse.  Average holding weights have dropped from 0.77% to 0.37% over the same period, with the net underweight rising to -1.17%.This leaves sentiment in Xiaomi Corp (1810 HK)  among the worst in the China universe at present.Analysis taken from our China research, which covers 116 active China managers with combined AUM of $68bn

Xiaomi Exodus:  Confidence Fading Among Active China Investors

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

Will Semiconductor   Shan / Technical Analysis

New developments suggest caution is warranted, and leads us to believe the mixed market environment is poised to continue. The new and concerning developments include widening high yield spreads in the U.S. and Europe and improving relative strength for defensive Sectors -- both are clear signs of risk aversion. At the same time, global indexes remain above critical support levels; until this changes our neutral outlook remains appropriate.

New developments suggest caution is warranted, and leads us to believe the mixed market environment is poised to continue. The new and concerning developments include widening high yield spreads in the U.S. and Europe and improving relative strength for defensive Sectors -- both are clear signs of risk aversion. At the same time, global indexes remain above critical support levels; until this changes our neutral outlook remains appropriate.

Global Equity Strategy: Reason For Caution; Actionable Themes: Services/Technology & Staples

China

Sanan Optoelectronics Co., Ltd. operates in the business of researching, producing and selling of LED epitaxial wafers and wafers.

JCET Group Co., Ltd. operates in the semiconductor industry.  The Company's products include discrete devices and integrated circuits.  Through its subsidiaries, Jiangsu Changjiang also manufactures signal lamps used in industrial equipment and anti-theft door systems for consumer use.

LONGi Green Energy Technology Co., Ltd. develops, manufactures and sells silicon rods and silicon wafers. The Company's main products include 6 inch, 6.5 inch and 8 inch monocrystalline silicon rods and wafers.

LONGi Green Energy Technology (601012 CH)

Semiconductor Manufacturing International Corporation operates a semiconductor foundry. The Company provides integrated circuit foundry and technology services including the testing, development, design, manufacturing, packaging, and sale of integrated circuits. Semiconductor Manufacturing International offers its products and services around the world.

Semiconductor Manufacturing International Corp (SMIC) (981 HK)

Semiconductor Manufacturing International Corp (SMIC)

GigaDevice Semiconductor Inc. manufactures and distributes non volatile memory devices. The Company produces and sells memory cards, controllers, flash chips, integrated circuits, and other products. GigaDevice Semiconductor also operates goods and technology import and export, import and export agency, and other businesses.

Montage Technology Co., Ltd. manufactures electronic components. The Company produces memory interface chips, consumer electronics cores, and other products. Montage Technology supplies its products in memory, server, cloud computing, and other fields.

Tianjin Zhonghuan Semiconductor Co., Ltd. manufactures discrete semiconductor devices. The Company's main products are High Voltage Diode, Silicon Rectifier Diode, Silicon Bridge Rectifier, MWO High Voltage Silicon Diode and special High Voltage Silicon Diode .

Tianjin Zhonghuan Semiconductor (002129 CH)

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.

TongFu Microelectronics Co., Ltd. manufactures integrated chips. The Company provides assembling and testing service for memory, microprocessor, micro-controller, hybrid circuit, analog circuit, and other related services throughout China.

Hangzhou Silan Microelectronics Co., Ltd develops, researches, tests, and sells integrated circuits.

Hangzhou Silan Microelectronics Co., Ltd (600460 CH)

ASE Technology Holding Co., Ltd. offers assembly and testing services. The Company provides outsourced assembly, semiconductor testing, semiconductor packaging, and other related services. ASE Technology Holding operates in Taiwan.

Lasertec Corporation develops, designs, manufactures and markets photomask inspection systems to make semiconductor devices, confocal scanning laser microscopes and liquid crystal display (LCD) inspection systems.

SCREEN Holdings Co Ltd.  manufactures and sell semiconductors, FPD devices, commercial printing and printed circuit boards(PCB). The company also provides additional services for its products.

MKS Instruments, Inc. develops, manufactures, and supplies instruments and components used to control and analyze gases in semiconductor manufacturing and similar industrial manufacturing processes. The Company's products are used to manufacture flat panel displays, magnetic and optical storage devices and media, solar cells, fiber optic cables, and diamond thin films.

Skyworks Solutions, Inc., a wireless semiconductor company, designs and manufactures radio frequency and complete semiconductor system solutions for mobile communications applications.  The Company provides front-end modules, radio frequency subsystems, and system solutions to wireless handset and infrastructure customers worldwide.

United Microelectronics Corporation designs, manufactures, and markets integrated circuits (ICs) and related electronic products.  The Company's main products are consumer electronic ICs, memory ICs, personal computer peripheral ICs, and communication ICs.

Realtek Semiconductor Corp. designs, tests, and distributes integrated circuits which are used in consumer electronics, computer systems and peripherals, and communication network hardware.  The Company also provides technical counseling and systems software services.

Onto Innovation Inc. provides process control solutions and inspection systems. The Company offers solutions which primarily used in the fabrication of semiconductors and other solid-state devices, as well as industrial and scientific applications. Onto Innovation serves customers in the United States.

Novatek Microelectronics Corporation designs, manufactures, and markets integrated circuits (ICs).  The Company's products are used in telecommunication, computer peripherals, and LCD (liquid crystal display) drivers.

Amkor Technology, Inc. provides semiconductor packaging and test services.  The Company offers deep submicron wafer fabrication, wafer probe testing, integrated circuit packaging assembly and design, final testing, reliability testing, burn-in, and electrical characterization.

Will Semiconductor Co.,Ltd. Shanghai manufactures image sensor products and semiconductor products. The Company produces and sells complementary metal oxide semiconductors, protecting devices, power devices, power management integrated circuits, radio frequency devices, microphone sensors, and more. Will Semiconductor Shanghai markets its products worldwide.

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Will Semiconductor Shan (603501 CH)

Novatek (3034.TT): 1Q22 Results/ 2Q22 Outlook- The Outlook Seems Better than Feared in 2022. .

Novatek's revenue/GM/OPM/NM was NT$36.512bn50.73%/36.73%/30.5% in 1Q22. In our views, we revise up to be revenue/GM as NT$38.7bn/50.98% in 2Q20....

Patrick Liao

Novatek (3034.TT): The Growth Trend Seems Slowing Down Since 1Q22.

Novatek’s monthly revenue is increasing above 20% YoY from July 2020. The growth still keeps stacking up for a higher record in 4Q21. However, the...

Patrick Liao

Xiaomi Exodus: Confidence Fading Among Active China Investors

China managers are losing faith in Xiaomi Corp (1810 HK). From peak ownership of 32.5% of funds back in December 2020, active China managers have...

Steven Holden

Global Equity Strategy: Reason For Caution; Actionable Themes: Services/Technology & Staples

With interest rates expected to move sideways to lower, we recommend a mix of growth and defensive Sectors. Today we focus on Services/Technology...

Vermilion Research

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