Tech Hardware and Semiconductor

1. AMD. It’s A Marathon, Not A Sprint

By William Keating, Ingenuity

• Q124 revenues of $5.5 billion, $100 million above the guided midpoint, down 11% QoQ but up 2% YoY.
• Looking ahead, AMD forecasted the current quarter revenues of $5.7 billion, up 3.6% sequentially.
• Share price down 7% in AH and down 35% from its recent 52 week high. We could see it retest the $100 level in the coming months

2. Taiwan Tech Weekly: Major Week of Earnings; Apple’s Edge AI Could Make Your Current IPhone Obsolete

By Vincent Fernando, CFA, Zero One

• Taiwan Tech Rebounds Sharply Alongside Major Nvidia/U.S. Tech Rebound Last Week. Wave of Major Earnings Releases This Week — See Our Key Events Section.
• Apple’s Latest Supplier List Released Last Week — Nanya Tech, Lotes, and Novatek Dropped. New List Shows Apple Struggling to Diversify from China.
• Apple iOS 18 Will Heavily Feature Edge AI Running Locally on the iPhone for User’ Privacy and Security — We Believe This Could Be a Major Driver of Phone Upgrades

3. Key Insights from Qualcomm’s Latest Data; Mediatek Taking Market Share?

By Vincent Fernando, CFA, Zero One

• Qualcomm’s latest earnings came in at the high end of guidance with automotive revenue surging and mobile steady. We analyze QCOM results’ key implications for Mediatek.
• Qualcomm’s 2024E global handset market volume guidance remained unchanged vs. last quarter; however we believe Mediatek may have taken some market share in CY1Q24.
• Qualcomm confirmed Mediatek’s view regarding high-end phone demand strength right now, with AI capabilities the likely driver. Combining QCOM + Mediatek color suggests an AI-driven handset upgrade cycle ahead.

4. PC Monitor: The Next Version of MSFT CoPilot Will Be the Killer App for a Global AI PC Upgrade Cycle

By Vincent Fernando, CFA, Zero One

• Branded PC makers’ shares have been mostly lower in April, however Intel and Microsoft developments are providing strong signals for a future PC upgrade cycle into AI PCs.
• Over 60% of Fortune 500 companies are now using Microsoft’s CoPilot AI assistant; Intel expects the industry to exceed its prior forecast for AI PC shipments in 2024E.
• CoPilot is the killer app that will trigger a global enterprise PC upgrade cycle; The next generation of CoPilot will be an edge AI app that will require powerful hardware.

5. Taiwan Dual-Listings Monitor: TSMC & ASE Spreads Surge to Extremes; CHT Shorts Massing Pre-Earnings

By Vincent Fernando, CFA, Zero One

• TSMC: Premium Soars to +15.2%, Good Level to Consider Shorting the Spread
• UMC: Spread Bounces from Lows to Relatively Extreme High of +1.9%; Good Level to Short
• ASE: Spread Soars to Near All-Time High of +15.5%; Consider Shorting the Spread

6. Mediatek Seeing Massive Rebound in Mobile; Major AI Data Center Driver on the Horizon

By Vincent Fernando, CFA, Zero One

• Mediatek Enjoying a Massive Rebound for its Mobile Phone Segment; Most Optimistic About High-End Smartphone Demand
• New AI Data Center Growth Driver on the Horizon; Recent Investment in U.S. AI Server Chip Startup
• Recent Share Price Dip is an Accumulation Opportunity; We Rate Mediatek as a Structural Long

7. Deep Dive Into Samsung’s Memory & Foundry Results: TSMC, AI PC, Server, AI Phone Implications

By Vincent Fernando, CFA, Zero One

• Samsung 1Q24 results beat consensus by a wide margin and the company gave strong guidance for its Memory segment, guiding for further strength driven by servers, PCs, & phones needs.
• Guided strong demand for PC/Mobile Memory in 2H24E driven by on-device AI, which supports the case of edge AI hardware beginning to drive demand in addition to cloud/server-based AI hardware.
• Foundry segment’s losses reduced, but still loss-making? Samsung’s order backlog is at an all-time high but Samsung Foundry results suggest manufacturing yield performance likely well behind TSMC.

8. Siltronic Slashes 2024 Sales Forecast As Inventory Woes Worsen

By William Keating, Ingenuity

• Siltronic cut its 2024 sales revenue forecast by 10% just days ahead of their Q124 earnings release
• Inventory levels, while gradually improving, are still at all time record highs
• In the case of Siltronic, it seems likely that Automotive end-market weakness is the main culprit

9. Earnings Week of April 26th

By Douglas O’Laughlin, Fabricated Knowledge

• This earnings post will be a bit less detailed than usual. I just finished a move mid-earnings, and it was insanely distracting. So, I’ll start with the spark notes before I go into depth.

• Industrial (TXN) is possibly bottoming, Automotive is probably bottoming (TXN), but SiC (STM) is doing much worse, and mobile (TER) hasn’t changed quite much. Consumer (NOD) got a substantial call out.

• Telecom (MXL, INTC) is about to bottom imminently. I continue to like MaxLinear and other companies that are exposed to telecom. HBM (TER, SK) continues to be strong. In Semicap, Logic is strong, HBM is strong, and China is declining less than expected.

10. Lasertec (6920 JP): Orders Up, Guidance Down

By Scott Foster, LightStream Research

• The share price has bounced back on strong 3Q orders and long-term optimism, but weak 4Q guidance calls the growth trajectory into question.
• Guidance, which has sales dropping to about half what they were a year earlier, is based on the expected timing of customer acceptance of delivered equipment. It could be conservative.
• At 75X EPS guidance for FY Jun-24, a rate of growth not visible in current trends has already been discounted. Current orders should translate into sales in 2026.

1. Why Tesla Shows Post Results Rebound of over 10%?

By Andrew Lu

• Again, Tesla reports a 1Q24 sales with 4% miss but post market share price up more than 10% for 6 reasons. 1. Gross margin was stable on 15% sales drop;
• 2. ASP was stable; 3. Affordable EV on track for 2025; 4. Factory expansion to slow; 5. Optimus to sell end of 2025; 6. 2024 EV shipment higher than 2023.
• Near term risks to remain: 1. When will margin trough? 2. Why bother to buy EV if 2nd hand market collapsing? 3. Will Robotaxi/FSD bring in meaningful sales/profits soon?

2. TSMC Just Provided Substantial Visibility into Their Long-Term Growth Estimate; ASML Adds Color

By Vincent Fernando, CFA, Zero One

• TSMC and ASML reported 1Q24 results last week; both stocks have fallen post results, impacted by global concerns despite a strong outlook for these two leaders into 2025E.
• TSMC guided for strong growth not just in 2024E, but if one digs into management’s comments, they actually provided strong visibility into their 2028E internal revenue expectations.
• For ASML, its EUV product business is the key indicator to watch. We believe TSMC shares will continue to re-rate even through a period of global economic softness.

3. TSMC, ASML, VAT Group, and Alphawave Earnings

By Douglas O’Laughlin, Fabricated Knowledge

• It’s time for the main event: earnings are upon us. As is customary, let’s start with TSMC, move to ASML and Alphawave, and then discuss VAT Group.
• TSM revenue is above guidance, gross margins are a bit ahead of the midpoint, and operating margins are at the high end of guidance.
• First, while this is a good result, semiconductors are due for a correction. I wrote about this in March, and SOXX has quietly crept downwards since then.

4. Taiwan Dual-Listings Monitor: TSMC Breaks Down From Extreme, UMC Discount Near Historical Low

By Vincent Fernando, CFA, Zero One

• TSMC: +9.2% Premium, Major Breakdown From Previous Historically Extreme High
• UMC: -1.9% Discount, Is Near Low End of Historical Range
• ASE: +10.4%; ADR Short Interest Jumps to Very High Level vs. History

5. Intel Is Shifting Focus to Products, Away from Manufacturing/Foundry; Worth to Follow?

By Andrew Lu

• Intel misses 1H24 market consensus again, post market correction of over 7%. Can shifting focus away from foundry/manufacturing help?
• Is the breakdown change for future spin off/IPO of foundry/manufacturing, and non focus businesses like Altera and Mobileye positive?
• We disagree Intel foundry to breakeven in two years; we see AI product lagging behind competitors and non AI server CPU being squeezed by AI server GPU and GPU/CPU integration.

6. Lasertec (6920 JP): Further to Fall

By Scott Foster, LightStream Research

• Lasertec has dropped more than 20% in the past week and a half, but is still selling at more than 60x EPS guidance for FY Jun-24.
• Weak orders at ASML, disappointing guidance from TSMC and doubts about Intel’s equipment purchases cast doubt on Lasertec’s growth potential.
• Between December 2021 and June 2022, Lasertec’s share price dropped by more than 50%. Wait for Q3 results before reaching for a falling knife. 

7. Q124 Tesla & Meta: Compare & Contrast

By William Keating, Ingenuity

• Tesla had a dismal quarter but Musk told a fairy tale about RoboTaxis and Robots and the markets rejoiced
• Meta had a beat & raise quarter but Zuckerberg told the truth about the fact that it would take time to monetise their AI investments and the markets recoiled
• Markets are on edge and big moves either way can be expected post earnings

8. SK Hynix: AI Is Still the Main Driver

By Jim Handy, Objective Analysis

• SK hynix earnings were announced, with a 10% Q/Q revenue increase driving a 734% increase in operating profit
• Although the company cited AI demand as the basis for this, its DRAM revenues, which are very AI dependent, increase very little
• NAND SSD demand increased significantly, with a 30% increase in revenues, largely attributable to price increases

9. Taiwan Tech Weekly: Semi/AI Darlings Slammed; TSMC Supply Chain Insights; ASE Wins Key IPhone Order

By Vincent Fernando, CFA, Zero One

• Taiwan Tech Shares Fell Sharply Along With Global Selling — Semiconductor and AI Names Most Exposed
• What Is TSMC Telling Us About Semi Supply Chain Stories at Its Investor Conference? 
• ASE Technology Holding (3711 TT) Wins iPhone 16 System-in-Package Order from Apple (AAPL US)

10. Memory Monitor: What SK Hynix Sees For PC and Server Markets Ahead; TSMC’s Strength Vs. Samsung

By Vincent Fernando, CFA, Zero One

• SK Reports Massive Margin Rebound; Nanya Tech’s Financial Performance Appears Relatively Weak in Perspective
• AI Applications Now Translating Into Rising Solid-State Memory (SSD) Demand
• SK Povided Positive Color for Taiwan PC Names; New TSMC Collaboration Highlights TSMC Strength vs. Samsung

1. TSMC. How To Turn Chicken Salad Into Chicken Sh*t

By William Keating, Ingenuity

• Q124 revenues of $18.87 billion, marginally above the high end of the guided range, up 12.9% YoY and down 3.8% QoQ. Guided Q224 +6% QoQ.  Maintained full year 2024 outlook
• Unnecessary, minor downward revisions for semi & foundry growth, combined with confusion about the reason triggered an allergic reaction on the markets. TSMC down ~8% since.
• SMCI plunged 23% by Friday close, ARM down 16.9%, NVIDIA down 10%, AMD & Micron down ~5% etc. Nice one, TSMC!

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

By Andrew Lu

• 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.

3. Multiple Positive Catalysts Ahead Of Q124 Earnings Season

By William Keating, Ingenuity

• PC, Smartphone Unit shipments both registering YoY growth in Q124
• TSMC will beat guidance & likely guide Q224 up ~5% QoQ. Samsung’s pre earnings showed strong recovery in operating profit
• Server unit shipments are on a ~17% YoY growth run rate

4. Taiwan Tech Weekly: Apple Suppliers Slump on IPhone; PC Volumes Back to Growth; TSMC & ASML Results

By Vincent Fernando, CFA, Zero One

• Apple supply chain names are falling due concerns about weak iPhone shipments. Global PC shipments returned to growth as per IDC data.
• TSMC and ASML results this week and will be cruical for the market. Can TSMC rally again to achieve new highs or will it continue trading lower?
• Nanya Technology sees DRAM Industry pricing rising through 2024E; but is underperforming financially.

5. TSMC (2330.TT; TSM.US): 2Q24F Sales in Line, 2024F Is Lowering the Growth Target Below 25% YoY

By Patrick Liao

• Declaring a slower recovery for mature nodes was an outlier, indicating that Vanguard’s recovery progress might be slower. 
• Apple’s iPhone is expected to be the focus for N2 production in 4Q15F.  
• TSMC’s long-term gross margin is set at 53%, signifying a few key points. 

6. ASML. Maintaining 2024 Guidance Despite Sharp Decline In New Bookings

By William Keating, Ingenuity

• ASML reported Q124 revenues of €5.3 billion, in line with expectations, down 27% QoQ and down 21% YoY.
• Guided Q224 for €5.95 billion, down ~23% YoY. This implies H224 will have to be much stronger than H124 in order to maintain full year 2024 guidance of flat YoY
• New order intake was €3.6 billion, down significantly from the €9.2 billion in the prior quarter, and challenging the narrative of a strong growth year in 2025

7. Novatek (3034.TT): 2Q24F Keeps Growing, and 3Q24F Shall Grow Significantly.

By Patrick Liao

• Novatek Microelectronics Corp (3034 TT)‘s sales in 1Q24 showed a 6.2% YoY growth, implying a positive growth outlook for 2024F compared to 2023.
• Looking ahead to 2Q24F forecasts, the anticipated orders from United Microelectronics Corp (2303 TT) could have a positive impact on Novatek’s 1Q24 sales.
• A significant growth is expected after 2Q24, particularly following Novatek’s qualification for the Apple (AAPL US) iPhone 16.

1. Taiwan Dual-Listings Monitor: TSMC Continues Falling from Extreme Level; CHT at Unusual Discount

By Vincent Fernando, CFA, Zero One

• TSMC: +11.8% Premium — Falling Closer to Its Historical Range
• ASE: +9.2% Premium; Further Breakdown Could Indicate Return to Previous Trading Range
• CHT: -1.8% Discount — Good Level to Long the Spread

2. The Data Center is the New Compute Unit: Nvidia’s Vision for System-Level Scaling

By Douglas O’Laughlin, Fabricated Knowledge

• Nvidia CEO Jensen Huang has repeatedly emphasized that the data center is the new unit of compute.
• While this concept seemed straightforward at first, the deeper implications became clearer after Nvidia’s presentations at GTC and OFC 2024.
• I only recently grasped exactly what is happening, and a simple reframing of the underlying principles that drove Moore’s Law makes the entire picture clearer.

3. Will Taiwan Quake Trigger a Shortage?

By Jim Handy, Objective Analysis

• A major earthquake struck Taiwan on April 3, where 25-30% of the world’s semiconductor wafers are produced
• Most semiconductor fabs are far away from the earthquake’s epicenter
• Those companies that have issued statements indicate that damage was slight, but there is still likely to be a shortage, which should boost chip maker profitability through 2024

4. TSMC (2330.TT; TSM.US): 2Q24F Preview; TSMC Is Anticipated to Receive ~US$5Bn from the US Chip Act.

By Patrick Liao

• TSMC Q2 2024 outlook is expected to increase by approximately 5% QoQ, with 2024 projected Capex to see a slight uptick. 
• Intel is expected to adopt TSMC N3B technology in 2Q24F, while we anticipate that MediaTek will transition to N3E by the end of 3Q24F.  
• Intel has received financial assistance of US$8 billion through the US Chips and Science Act, and TSMC is also projected to receive around US$5 billion.

5. Taiwan Tech Weekly: Quanta Surging on Nvidia Server Orders; Nanya Results Ahead; Intel Foundry Event

By Vincent Fernando, CFA, Zero One

• Quanta surged with major server wins from Meta, Alphabet, and Amazon. Nanya Tech results are two weeks ahead and Intel will host a webinar this week about its Foundry business.
• Mediatek: Accelerating Momentum in Automotive, Data Center, and AI Memory Solutions 
• Hon Hai (Foxconn): After the 50% Surge, Where Can It Go From Here? 

6. Fabricated Knowledge Quarterly Review

By Douglas O’Laughlin, Fabricated Knowledge

• This is the first edition of a quarterly summary piece to highlight my ideas and best pieces quarterly.
• This is one of the 16th-best quarters in SOXX since 2002. While it’s a pretty solid showing at a 17% quarterly return, this doesn’t compare to the incredible returns in 2020 and 2023.
• Now, the misleading thing is that SMH, a broader ETF, is up 30%.

7. Intel’s New Segment Reporting. Transparency Or Obfuscation?

By William Keating, Ingenuity

• Intel launched a new segment reporting structure under which its newly created Foundry P&L allegedly racked up operating losses of ~$17 billion over the past three years
• The Foundry P&L is not expected to reach breakeven until the ’27/’28 timeframe
• Intel’s share price is down >10% in the two days since the new financial model was launched. 

8. Post Nvidia GTC Industry Impact: Large Quanta Server Win Just the Beginning of an Order Wave?

By Vincent Fernando, CFA, Zero One

• Just a week after Nvidia’s GTC conference, Quanta has reportedly secured large orders for new Nvidia Blackwell-based servers from Google, Amazon AWS, and Meta. 
• Other firms showcasing Nvidia servers at GTC include Wiwynn, Gigabyte, Pegatron, Asus, Hon Hai (Ingrasys), Wistron, Dell, and Super Micro. There could be a higher probability of new order wins.
• Stock Focus: Asustek — Improving outlook as a play on both AI PCs and AI servers.

9. Yaskawa (6506 JP): Start of a New Factory Automation Growth Cycle

By Scott Foster, LightStream Research

• The outlook for factory automation is improving with inventory clearance, the upturn in the semiconductor industry and an AI-enhanced response to the labor shortage.
• Yaskawa’s margins should continue to rise with renewed growth in Robotics, efficiency gains and an upgraded product line. 
• Valuation stretched at 30x EPS guidance for FY Feb-25, but current weakness looks like a long term buying opportunity.

10. Vanguard (5347.TT): A Consensus View to Build a New 12″ Fab in Singapore.

By Patrick Liao

• The utilization rate for Vanguard in 1Q24F is at a recent low of 50-53%, indicating that the utilization rate is expected to increase from 2Q24 onwards.  
• Vanguard should consider building a new 12″ Fab in Singapore, aligning with our potential acquisition of Taiwan Semiconductor (TSMC) – ADR (TSM US)’s 40nm and above business.
• In conclusion, the future outlook appears promising for the coming 3~4 years.  

1. Missed The AI Mania Surge? Here’s A Few Options Still Worth Considering

By William Keating, Ingenuity

• It’s probably not a good idea to chase the AI mania surge by buying the likes of NVIDIA, AMD, Micron etc at their currently highly elevated share prices
• Taiwan has a large ecosystem of semiconductor companies many of which are critical to the AI hardware supply chain
• We present a range of options with exposure to AI hardware for your consideration including foundry, fabless IC design, server BMC & Copper Clad Laminate

2. Micron’s Earnings and Broadcom’s Accelerators

By Douglas O’Laughlin, Fabricated Knowledge

• I wrote about this in my recent post about HBM, and it seems almost everything I talked about became true. HBM is going to bail out the memory markets meaningfully.
• Let’s talk about earnings, but I was hoping you could keep this post in mind while I discuss Micron.

• These are the kinds of beats we start to see when the cycle turns. Now, the stocks have begun to anticipate this, but given the pricing dynamics of HBM, I feel very confident in Micron’s ability to hit a new cycle high in profitability.

3. Hon Hai (Foxconn): After the 50% Surge, Where Can It Go From Here?

By Vincent Fernando, CFA, Zero One

• Hon Hai shares have hit a new all-time high and have just risen past our target price of NT$155, surging after investors flocked to Hon Hai on AI news.
• Hon Hai showcased two key technologies at Nvidia’s GTC conference last week: Nvidia-based AI servers with liquid cooling systems and an AI autonomous driving controller using Nvidia’s Orin X processor.
• Hon Hai’s sharp rally appears to have partly been caused by a short squeeze; While we like the long-term fundamentals and increased TP to NT$170, Hon Hai appears near-term overbought.

4. Taiwan Tech Weekly: Key Taiwan Server Names Soar; Raising TSMC Growth Target; Memory Rally

By Vincent Fernando, CFA, Zero One

• Key Taiwan Server Names Soar; Delta Electronics Major Winner of Nvidia’s Conference
• TSMC (2330.TT; TSM.US): Raising Growth Target to 25%+ YoY in 2024F
• Memory Monitor: Micron Leapfrogging Into HBM3E for AI; Nanya Lagging Peers But Poised to Benefit 

5. Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up

By Scott Foster, LightStream Research

• MHI’s share price has risen more than 60% year-to-date and nearly tripled over the past 12 months on the improving outlook for Japanese defense contractors.
• A huge increase in new orders, prospects for a doubling of sales and a rapidly rising operating margin on Aircraft, Defense & Space have been factored into the price.
• The shares do not look expensive compared with international comparables, but neither are they particularly cheap. Potential problems, from Japanese defense budget constraints to production glitches, have been ignored. 

6. MediaTek (2454.TT): Dimensity 9400 Unveiled in Sep; 2Q24F Sales Could Be a Bit Higher than 1Q24F.

By Patrick Liao

• Mediatek Inc (2454 TT) Dimensity 9400 is expected to be released in September 2024F.  
• Artificial Intelligence (AI) is a trending topic, and MediaTek is adapting by emphasizing Generative AI functionality in its Dimensity 9300 and 9400 smartphone models.  
• The smartphone market is expected to recover in 2024F, with MediaTek’s revenue in the second quarter potentially surpassing the first quarter.

7. Delta Taiwan Vs. Thailand Monitor: Delta Taiwan Surges As New AI Play; But Shorts Amassing as Well

By Vincent Fernando, CFA, Zero One

• Delta Taiwan Outperforms Delta Thailand After Showcasing Its AI Power Efficiency Solutions at NVIDIA Corp (NVDA US)’s GTC Conference 
• Delta Taiwan vs. Thailand Valuation Mismatch Has Corrected Further; Delta Thailand Finally Worth Less Than Its Parent
• Short Interest Spiked for Delta Taiwan; Taiwan Rally Short-Term Overdone Due to AI Concept Stock Hype?

8. Semiconductor Real Time Indicators Update

By William Keating, Ingenuity

• Taiwan companies are required to report revenue on a monthly basis. These updates can help us understand how a given quarter is progressing & predict quarterly earnings ahead of time
• Initially we focused on MoM %  increase/decrease. This is useful, but one needs to account for anomalies such as seasonality and potential non-linearity month to month within a given quarter 
• We now also provide the monthly YoY revenue comparison. This eliminates anomalies due to both seasonality and intra-quarter non-linearity, enabling a clearer perspective on where the industry is at. 

9. Mediatek: Accelerating Momentum in Automotive, Data Center, and AI Memory Solutions

By Vincent Fernando, CFA, Zero One

• Mediatek is advancing full speed with recent industry collaborations for automotive chips, data center connectivity solutions, and AI memory solutions.
• In particular, the company has entered the market for Co-Packaged Optics (CPO), with partnerships announced with Foxconn and Ranovus.
• While the stock has rallied and re-rated, consensus forward estimates do not appear overly demanding and could still have room to increase further.

1. Jensen’s World: Compressing Reality

By Douglas O’Laughlin, Fabricated Knowledge

• “It is so much cheaper to do simulations than real experiments, so much more flexible in testing…we can even do things which cannot be done in any lab… So it’s inevitable this trend will continue for some time.” – Richard Hamming, The Art of Doing Science and Engineering.
• Richard Hamming said this to the President of Bell Labs in the 1950s. And I think this insight rings more accurate than ever. Simulations of reality are much more flexible and cheaper than observing and interacting with reality.
• I will assert that LLMs and “AI” are effectively the logical conclusion of this trend. A large language model is trained on the largest amount of data possible, often the entire crawlable Internet, all the books ever written, and so much more.

2. The First Semi-Micron to Guide 2Q24; All Good News Except MOI

By Andrew Lu

• Earlier expectation on Micron will have rooms to raise becoming a reality, largely driven by over 30% q/q NAND bit price jump for storage business in 1Q24.
• 10ppts stronger 2Q24 sales guidance and 3-6ppts higher gross margin guidance are driving free cash flow improvement.
• AI server, PC, and smartphone driving DRAM bit demand and HBM3e/HBM4 and 1-gamma EUV DRAM slowing bit supply growth both are positive except MOI remains 15% above 5 years average. 

3. Micron. Back In The Black & No Going Back

By William Keating, Ingenuity

• Q224 revenues of $5.8 billion, up 23% QoQ and up 58% YoY. It also well above the high end of the guided range of $5.5 billion.
• Net income turned positive & amounted to $476 million. This compares to a loss of $1 billion in Q124
• Forecasting current quarter revenues of $6.6 billion & gross margin of 26.5% at their respective midpoints

4. Taiwan Tech Weekly: Nvidia Conference; Samsung to Hike NAND Prices; TSMC Adding Capex Due to Demand

By Vincent Fernando, CFA, Zero One

• Nvidia GTC Conference This Week Likely to Create Newsflow for Many Tech Names
• Samsung Could Hike NAND Flash Prices by 20%; Silicon Motion for Exposure
• TSMC Reportedly Placing Orders for Additional Advanced Packaging Capacity, Likely In Response to Demand Strength

5. Taiwan Dual-Listings Monitor: TSMC Premium Slumped But Remains Extreme; UMC at a Discount

By Vincent Fernando, CFA, Zero One

• TSMC: +15% ADR Premium; Likely to Trend Further Lower Over Time
• UMC: -2.3% Discount; Decent Level to Long the ADR vs. Short Local
• ASE: +11.6% Premium; Continue to Advocate Shorting the Spread Here

6. Micron Earnings: HBM Driving Price Increases in Other Sectors

By Jim Handy, Objective Analysis

• Micron Technology reported very positive revenues this quarter and a return to profitability
• A large part of this stems from the impact that HBM demand is constraining production of standard DDR5 DRAM, driving it into a shortage
• This is good news for Micron and its DRAM competitors Samsung and SK hynix

7. NEC (6701 JP): Generative AI (Part 2)

By Scott Foster, LightStream Research

• CEO Jensen Huang’s keynote address at Nvidia’s GTC event on March 18 was a reminder that generative AI is about building secure and reliable systems, not chatting up the future.
• NEC has spent three years developing its own AI supercomputer, creating the best performing Japanese-language large language model (LLM), and testing new AI products in-house before delivering them to clients.
• The introduction of generative AI and LLMs into business- and industry-specific solutions should provide meaningful additions to NEC’s telecom services, social infrastructure, aerospace and national security related businesses. 

8. TSMC (2330.TT; TSM.US): Raising Growth Target to 25%+ YoY in 2024F.

By Patrick Liao

• Taiwan Semiconductor (TSMC) – ADR (TSM US) revenue growth target for 2024F is set at 25% or higher.
• TSMC’s dominance in the CoWoS market, with nearly 100% share, positions them well.
• TSMC’s plans to establish a new Fab in Chiayi, Taiwan, reflect the growing end demand.  

9. Generative AI. Innovation Turns To Litigation, Licensing & Regulation

By William Keating, Ingenuity

• The EU has just launched the World’s first AI Act
• OpenAI claims the NYT tried to hack ChatGPT in order to prove they used their archive material during  one of its training phases. 
• Google’s licensing of Reddit’s content in advance of the latter’s impending IPO is a win-win for both, and likely how content creators can expect to be rewarded in the future

10. Intel. CHIPS Act Funding Ceremony Overshadowed By Reports Of New Fab Delays

By William Keating, Ingenuity

• Intel snags $8.5 billion in direct funding through the CHIPS and Science Act to advance its commercial semiconductor projects in Arizona, New Mexico, Ohio and Oregon.
• Investment Tax Credit (ITC) of up to 25% on > $100 billion in qualified investments and eligibility for federal loans up to $11 billion are also on offer
• Meanwhile, two separate reports suggest delays of up to two years in Ohio and suppliers in Arizona unable/unwilling to meet previous commitments to establish local supply chains. Ouch!

1. Taiwan Tech Weekly: TSMC Surge Leads Taiwan Stocks Higher; Advanced Chip Packaging in Focus

By Vincent Fernando, CFA, Zero One

• Massive TSMC Rises 13.8% in Just a Week; Mediatek a Top 10 Gainer for Second Week in a Row
• TSMC (2330.TT; TSM.US): Sales Should Be Gradually Increasing QoQ in 2024F; IPhone 16 Is on Schedule. 
• PC Monitor: Long Dell Vs. Short Acer Update; Dell & HPQ Results Indicate Opportunity in Asus 

2. Advantest (6857 JP): AI Speculation Discounted

By Scott Foster, LightStream Research

• Advantest has dropped back 11.5% from its recent high but is still up 43% year-to-date and up 2.3X from a year ago. Consolidation is likely to continue.
• Demand for High Bandwidth Memory (HBM) for use with AI processors could lift sales, profits and profit margins to new highs within the next two years.
• That could bring the projected P/E ratio down from 75.5x FY Mar-24 EPS guidance to 31x FY Mar-26 EPS in a favorable but not unreasonably optimistic scenario. 

3. Semiconductor 2023 Key Indicators In Review, 2024 Forecasts

By William Keating, Ingenuity

• Forecasting PC & Smartphone unit shipments to increase 5% YoY on the back on “AI Enablement”
• Server unit shipments declined ~20% in 2023 but overall revenues remained flat, a consequence of higher ASPs associated with AI-accelerated servers
• Server shipments will return to growth in 2024, likely +10% YoY. Server ASPs will increase yet again YoY as AI-server mix grows. 

4. NEC (6701 JP): Generative AI Is the Spark, Not the Driver

By Scott Foster, LightStream Research

• The P/E ratio has risen above 20x this fiscal year from no more than 13x in the previous four years, reflecting successful restructuring and investor enthusiasm for AI. 
• Profit margins are rising, but remain moderate in absolute terms with room for further improvement. The shares may consolidate, but they do not look overvalued.
• Management is aiming for generative AI sales of ¥50 billion in three years time. This is less than 2% of total sales, but a positive indicator for NEC’s software business.

5. Factors and Semiconductors

By Douglas O’Laughlin, Fabricated Knowledge

• Markets always act erratically, but I thought I would highlight one aspect that disproportionately impacts semiconductors.
• Factor investing is not new, but we are in a unique period where Momentum has quite a period of outperformance and short-term outperformance.
• This matters because semiconductors are (as far as my memory holds) the most significant weight in Momentum I’ve ever witnessed. 

6. Silergy (6415.TT): Expecting a Seasonal Decline In 1Q24F, and Likely Another Growth Year in 2024F.

By Patrick Liao

• The short-term recovery momentum observed in China and consumer markets.
• The Gen 3 in 4Q23 accounts for about 50% of the production, expected to increase to around 60-70% in 4Q24F.
• Expecting to improve quarter by quarter after reaching the bottom in 1Q24F, and the growth is expected to recover to around 20%+ YoY in 2024F.

7. Hon Hai: Beat & Raise; Further Valuation Upside; AI Server Product Announcements Next Week

By Vincent Fernando, CFA, Zero One

• Hon Hai’s 4Q23 profit beat consensus and management has become more bullish on 2024E revenue thanks to demand for AI servers.
• Guided 40% YoY growth expected for AI servers; Separately, Hon Hai reportedly could have won a major AI server order from HP Enterprise according to Digitimes.
• Hon Hai shares are finally moving; We see room for continued upside based on re-rating of the company’s valuation. Positive news flow potential through Nvidia’s GTC conference next week.

8. Vanguard (5347.TT): 1Q24F Could Be the Recent Bottom, and 2Q24F Should Be an Upside 10% QoQ.

By Patrick Liao

• We anticipate that the guidance upper limit for 1Q24F results may be reached.  
• The outlook is expected to see approximately a 10% QoQ increase in 2Q24F.  
• The recent stock market performance may reflect enthusiasm for Vanguard, despite temporary disregard for the name.

1. Why HBM is the Hottest Thing in Memory

By Douglas O’Laughlin, Fabricated Knowledge

• Investing in semiconductors can be pretty simple if you let it be.

• At a high level, I believe you want to invest in the secular at a decent price or invest in places where there are unwarranted dislocations.

• Sometimes the entire ecosystem says one thing and the stocks say another. Usually, the ecosystem is right.

2. TSMC (2330.TT; TSM.US): Sales Should Be Gradually Increasing QoQ in 2024F; IPhone 16 Is on Schedule.

By Patrick Liao

• Taiwan Semiconductor (TSMC) (2330 TT) is ramping up its CoWoS capacity, with the aim of increasing new capacity by 32k wafer/month in the end of 2024F.
• In the second half of 2024F, the Apple (AAPL US) iPhone 16 will contribute to revenue from shipments.
• The semiconductor industry is expected to rebound in 2024F, with TSMC being one of the leaders.

3. Global Semi Sales Decline 2.3% MoM In January

By William Keating, Ingenuity

• It’s the first MoM decline in semi sales since February 2023, but it’s a seasonal thing & YoY comparisons continue to grow stronger. 
• Forecasting 10% YoY growth in 2024 semiconductor sales, in line with TSMC’s outlook
• $1 trillion in annual semiconductor sales will likely happen in 2032 based on a 7.7% CAGR over the coming decade. 

4. Taiwan Dual-Listings Monitor: Long TSMC Taiwan Shares Vs. ADR on Historically High Spread; UMC, ASE

By Vincent Fernando, CFA, Zero One

• TSMC: +22.9% ADR Premium is Near an All-Time High; Long Taiwan Shares vs. Short the ADR
• UMC: 2.2% Premium; Flipped Positive From a Discount; Likely to Contract
• ASE: +13.3%; Short the Historically High Spread at the Current Level

5. GlobalWafers (6488.TT): 1Q24F Is a Down Quarter; Anticipating a Much Better Growth Rate in 2025F.

By Patrick Liao

• The sales in January 2024 were the lowest during the period of 2022-2024, indicating a likely downtrend for the first quarter of 2024.
• Demand is expected to be flat or slightly increase in 2Q24F for GlobalWafers, which is encouraging.
• The market for 12″ raw wafers is expected to have a more stable demand-supply balance, while raw wafers of 8” and smaller sizes could experience reduced demand in 1H24F.

6. Silicon Wafers Area Shipments Decline 14.3% YoY in 2023

By William Keating, Ingenuity

• Silicon wafers area shipments (in MSI) declined by 14.3% YoY in 2023
• Wafer revenues also declined by 10.9% to $12.3 billion over the same period
• We expect Q124 revenues to be down ~20% QoQ and anticipate a further 5% YoY decline in full year 2024 shipments

7. PC Monitor: Long Dell Vs. Short Acer Update; Dell & HPQ Results Indicate Opportunity in Asus

By Vincent Fernando, CFA, Zero One

• Dell has outperformed Acer and other Taiwan PC names Asus and MSI by a wide margin. Close Long Dell vs. Short Acer. Dell’s value gap has dissipated.
• Latest indications from Dell and HP highlight that the AI PC’s will drive upgrades from customers, but the PC recovery remains soft. AI PC impact only in 2025E.
• Dell and HPQ’s recent results provide positive color for upcoming Asus, Acer, and MSI results. Trade: Long Asus into its upcoming earnings results.