Tech Hardware and Semiconductor

1. NVIDIA’s Conundrum…

By William Keating, Ingenuity

• NVIDIA’s data center revenues tripled YoY in CY 2023 and are on track to more than double in CY 2024
• When Intel dominated the data centre and minted tens of billions annually, its customers benefited even more, minting hundreds of billions. 
• If NVIDIA’s business model succeeds, its customers will succeed even more. This will make it extremely difficult for NVIDIA to remain the #1 global market cap stock. 

2. Taiwan Tech Weekly: Apple Hikes TSMC Orders on Strong IPhone 16 Hopes; Google Shifts AI Chip to TSMC

By Vincent Fernando, CFA, Zero One

• Apple Increasing Chip Orders with TSMC — Expecting iPhone 16 Sales to be Much Stronger Than iPhone 15 Thanks to AI
• Google Said to be Shifting to TSMC from Samsung for Next Generation AI Mobile Phone Chips
• This June 28th piece appears to be timely — Memory Monitor: Micron’s Shares May Be Falling But Results’ Industry Implications Are Positive

3. PC Monitor: Growth Expectations Have Increased Recently; HPE Signals Enterprise AI Acceleration

By Vincent Fernando, CFA, Zero One

• PC & Server solutions names have fallen moderately from highs in June, however enterprise server company HPE soared 20% on AI strength.
• Despite the market pullback from highs, we note that 2025E forward growth expectations have generally increased for the universe over the last month.
• Latest Taiwan PC company revenues indicate healthy growth and HPE’s management guided for Enterprise AI orders to accelerate.

4. Fabricated Knowledge Q2 2024 Quarterly Review

By Douglas O’Laughlin, Fabricated Knowledge

• This is my quarterly piece, where I round up all of my favorite ideas (more explicitly) and explain some semiconductor jargon. This is a meta piece of content.

• First and foremost, I’ll start with performance. SMH returned 14% this quarter, among the best quarters in history for the semiconductor universe (again).
• This quarter’s leader was AOSL, who is rumored to have won a socket at Nvidia.

5. Micron Earnings, SiTime, Consumer, and Applied Materials Insider Sale

By Douglas O’Laughlin, Fabricated Knowledge

• Micron’s earnings were… acceptable.

• The market didn’t like the guide, but I think it is more of a function of expectations management.

• Micron is clearly on the upswing, and the stock needs healthy revenue and profit beats.

6. Apple Intelligence, Powered By ChatGPT. Genius Move Or Desperate Gamble?

By William Keating, Ingenuity

• Since Microsoft’s association with ChatGPT has become common knowledge, it’s share price has doubled
• Since rumours of an impending partnership with OpenAI first emerged, Apple share price is up 37% 
• The extraordinary valuations of Microsoft & Apple were driven by association with ChatGPT. Revenue growth to justify those valuations must now depend on ChatGPT. Let’s see how that works out.  

7. Silergy (6415.TT): Trial-Run with Vanguard, and Recent Stock Drops Represent an Entry Opportunity.

By Patrick Liao

• We are surprised that Silergy Corp (6415 TT) is using Vanguard Intl Semiconductor (5347 TT) to trial-run products.
• The outlook for 2024 remains unchanged at over 20% YoY, and we still see a path to recovery ahead.
• We consider the recent drop from NTD$526 on June 14th to NTD$429 on July 5th as an opportunity to consider entering the stock.

1. Taiwan Dual-Listings Monitor: TSMC & ASE Premiums Drop Sharply; ChipMOS Extreme Discount

By Vincent Fernando, CFA, Zero One

• TSMC: +16.1% Premium, After Sharp Drop, Will Be Interesting to See If Spread Will Remain Within the Recent ~15-25% Range
• ASE: +7.4% Premium; Can Consider Going Long the Spread Given Recent Trading Range
• ChipMOS: -2.4% Discount Repesents Extreme Low of End of Range; Can Consider Going Long the Spread

2. Memory Monitor: Micron’s Shares May Be Falling But Results’ Industry Implications Are Positive

By Vincent Fernando, CFA, Zero One

• Data Centers — Traditional Data Center Recovery Starting; In Addition to HBM Demand, SSD Memory Seeing Strength for AI Applications
• PCs — Upcycle to Accelerate “Late CY2024E”, Driven by Windows 12 and End of Windows 10
• Mobile Devices — Moderate Growth in CY2024E; Potential for Smartphone Upgrade Cycle Acceleration

3. Micron Earnings – What to Expect

By Jim Handy, Objective Analysis

• Expect Micron to report strength in AI, highlight the company’s HBM efforts, and quote McKinsey’s trillion-dollar forecast in their earnings call tomorrow
• Although Nvidia’s growth has really helped the DRAM market, along with 2023 CapEx cuts, there are important concerns of double-ordering which could lead to a collapse soon
• Semiconductor market revenues have leveled off since December 2023, hinting a return to more normal growth for the rest of the year

4. Taiwan Tech Weekly: Declines With Nvidia; Taiwan’s Vietnam Shift Continues; UMC’s Outlook Improves

By Vincent Fernando, CFA, Zero One

• Taiwan Shares Fall With Nvidia… SK Hynix HBM DRAM with Global Unichip? Taiwan’s Vietnam Shift Continues… Broadcom Developing an AI Chip with Bytedance
• TechChain Insights: Call with Elan Micro; AI PC Significant Uptake 4Q24/1H25; Supply Chain Preparing 
• UMC (2303.TT; UMC.US): The Outlook for 3Q24 Has Reached a Slightly Upside QoQ. 

5. Delta Taiwan Vs. Thailand Monitor: Taiwan’s Nvidia Solutions Show Why TW Better Value Than Thailand

By Vincent Fernando, CFA, Zero One

• Delta Taiwan has outperformed Delta Taiwan recently. The parent vs. subsidiary market cap ratio is now trading consistently over 1.0x. and can go higher in our view.
• Nvidia opportunities and other similar cutting edge technologies will first go to Delta Electronics Taiwan (2308 TT) and not to Delta Electronics Thailand (DELTA TB).
• Conclusion — Expect further Delta Taiwan outperformance over the long-term vs. Delta Thailand.

6. IHI (7013 JP): 30% Upside Potential as Aerospace and Defense Rebound

By Scott Foster, LightStream Research

• Japan’s rising defense budget and military collaboration with the US and Europe should support a high level of orders for the foreseeable future.
• Defense is the growth driver, but other divisions should hold up well due to the ongoing rationalization of operations.
• Profits should rebound this year and rise further in FY Mar-26, bringing the P/E down to 9X or less. The weak yen is a large positive. 

7. Semiconductor WFE Q124 Revenues, China’s Share & What Are They Doing With All Those Tools?

By William Keating, Ingenuity

• Global semiconductor equipment billings amounted to $26.4 billion in Q124, down 6% QoQ and down 2% YoY
• China’s annual WFE spending has roughly doubled between 2020 and 2023 to $36.6 billion
• A combination of China’s WFE customers including new entrants and a high failure rate among semi startups means that spending has not yet translated into corresponding increase in semi output

8. TechChain Insights: Call with TSMC Partner Global Unichip; Potential to Outpace TSMC Revenue Growth?

By Vincent Fernando, CFA, Zero One

• We hosted a conference call with Global Unichip (GUC); GUC is 34.8% held by TSMC and a key provider of semiconductor design services to companies aiming to manufacture with TSMC.
• GUC’s Revenue Prospects are Linked to TSMC’s Growth, However the Success of Its Customers’ Chips Also a Factor — Lagged Strong Revenue Growth Likely
• Conclusion: GUC a Second-Derivative Play on TSMC’s Structural Drivers with Potential to Surprise the Market and Catch Up to TSMC’s Share Performance

9. KYEC (2449.TT): AI Highly Growth Potential may exceed Expectation.

By Patrick Liao

• The King Yuan Electronics Co, Ltd. (2449 TT) outlook for 3Q24 could see a 5-10% quarter-on-quarter growth at present.  
• NVIDIA Corp (NVDA US)  is currently the second-largest client of KYEC, and its business is rapidly expanding.
• STMicroelectronics NV (STM US) and Will Semiconductor Shan (603501 CH) are currently the third and fourth largest clients, respectively.

10. Taiwan Dual-Listings Monitor: TSMC Premium Rangebound; UMC Hits Upper End of Range

By Vincent Fernando, CFA, Zero One

• TSMC: +16.7% Premium, Has Remained Rangebound; Watching for Over 20% or Under 15%
• UMC: +2% Premium, Upper End of Trading Range, Can Consider Shorting
• ASE: +9.9% Premium; Spread Could Have Further Room to Bounce Higher

1. Taiwan Tech Weekly: TSMC’s 3nm Shortage & Upcoming Price Hikes; Samsung Unveils AI Catch-Up Plan

By Vincent Fernando, CFA, Zero One

• TSMC’s 3nm Shortage: Capacity Filled Until 2026 Amid Surging Demand; Strategic Price Hikes Coming Soon
• Top Gainers/Losers: Taiwan Tech Rallies Alongside TSMC, Apple, Nvidia, ARM Strength
• Samsung Unveils Pathway to Catch Up With TSMC in the AI Foundry Race

2. Micron’s HBM. Multiple Billions Incoming..

By William Keating, Ingenuity

• HBM revenue on track to jump from a few hundred million in 2024 to “multiple” billions in 2025
• Micron expects to become FCF positive in the second half of their fiscal 2024 and to have a record revenue year in their fiscal 2025. 
• Micron’s is doing custom work on their HBM solutions. Customers are signing LTAs with defined pricing. This could easily spread to Micron’s non-HBM products also. 

3. Memory Monitor: Computex Showed Micron Leapfrog SK Hynix and Samsung; ‘Boring’ DRAM Could Now Hot Up

By Vincent Fernando, CFA, Zero One

• Computex showed how Micron has successfully leap-frogged SK Hynix and Samsung in HBM DRAM for AI Servers.
• Now, older ‘boring’ DRAM prices could surge as HBM DRAM production is voraciously consuming memory fab capacity.
• Why Nanya Tech shares could surge higher — A DRAM memory trade for those who don’t want to chase steep 52-week highs in Micron and SK Hynix.

4. Silergy (6147.TT): The Wafer Demand Is Projected to Increase by 30-40% QoQ from 2Q24 Onwards.

By Patrick Liao

• We presume Silergy is likely to see demand recovery or inventory rebuilding starting from 2Q24.
• Silergy’s wafer demand is projected to increase by 30-40% QoQ from 2Q24 onwards.  
• Silergy’s primary focus remains on China, Taiwan, and Korea, but the US market is promising for potential growth.  

5. Samsung, Nanya, Winbond. Watch This Space…

By William Keating, Ingenuity

• Greatly reduced growth-related WFE CapEx, cannibalisation of legacy node WFE for leading edge transitions and surging demand for HBM will likely trigger mainstream memory shortages by EOY 2024 
• Both Nanya and Winbond are well positioned to benefit from any industry-wide shortages
• If Samsung can sort out its HBM woes, it will be line for a re-rating

6. MediaTek (2454.TT): 2Q24 Guidance Is Achievable; to Take Advantage of the AI PC Replacement Trend.

By Patrick Liao

• Mediatek Inc (2454 TT)’s 3Q24 is expected to experience a quarter-on-quarter increase of about 5%.  
• MediaTek is currently developing new processors based on Arm architecture and natively supporting the Microsoft Windows operating system.
• It is believed that MediaTek will tape out with TSMC 3nm technology, targeting the 1H25 market.

7. UMC (2303.TT; UMC.US): The Outlook for 3Q24 Has Reached a Slightly Upside QoQ.

By Patrick Liao

• United Microelectron Sp Adr (UMC US) 3Q24 outlook could be showing a slightly upside quarter over quarter and the gross margin is approaching to ~30%.
• We estimate that UMC’s overall utilization in 3Q24 will be around 65-70%, with 12” at 70-75% and 8” at 60%.
• UMC is benefiting from Novatek shipping OLED DDIC to Apple (AAPL US) in 3Q24.

8. TechChain Insights: Call with Elan Micro; AI PC Significant Uptake 4Q24/1H25; Supply Chain Preparing

By Vincent Fernando, CFA, Zero One

• We hosted a conference call with Elan Microelectronics management; We view the company as a Structural Long position for the AI PC upgrade cycle.
• From the company’s perspective, significant impact from AI PC demand will come but not until 4Q24E or 1H25E. However, supply chain excess inventory improved and prepping for upcycle.
• An estimated 90% of AI PC models launched at CES 2024 use Elan’s products in their design; Elan well positioned for the upcycle and entrenching its position. Maintain Structural Long.

9. Novatek (3034.TT): To Achieve a ~5% QoQ Growth in Revenue and Relatively Flat GM QoQ in 3Q24

By Patrick Liao

• We expect Novatek Microelectronics Corp (3034 TT) to achieve approximately a 5% QoQ growth in revenue and relatively flat gross margin (GM) QoQ in 3Q24.
• Semiconductor Manufacturing International Corp (SMIC) (981 HK) and HLMC are capable of producing DDICs at 40nm and below.
• Novatek is experiencing a decline in demand for 55nm Touch with Display Driver (TDDI) in 3Q24.

10. TechChain Insights: Q&A with TSMC Supplier Kinik; Diamond Capex Implies Industry Strength Visibility

By Vincent Fernando, CFA, Zero One

• We conducted a Q&A with Kinik, who is a key supplier to companies including TSMC, UMC, and Micron.
• Kinik is dramatically expanding its diamond disk capacity; these products are critical to the production of wafers for advanced semiconductor nodes.
• We believe Kinik has high visibility into future industry demand. Gross margins are likely to expand in the coming years as advanced diamond products become increasingly important to wafer production.

1. Taiwan Dual-Listings Monitor: TSMC Historically Extreme Premium Continues; CHT at Short Level Again

By Vincent Fernando, CFA, Zero One

• TSMC: +21.3% Premium; Trading at New +15-25% Range This Year
• ASE: +12.7% Premium; We Continue to View 14%+ as Fresh Short Level
• CHT: +1.2% Premium; Good Level to Short Relative to History

2. Crypto Datacenters NAV

By Douglas O’Laughlin, Fabricated Knowledge

• There’s a gold rush in the world of AI for not just GPUs, but for datacenters and the power connections that supply them.
• Imagine this, you just bought 100,000 GPUs from Nvidia and you don’t have a place to put them or the power to feed them.
• Not being first to market is a huge cost, as the GPU pay back times are very quick right now even for the H100.

3. Global Semi Sales YTD 2024 & Outlook: The Good & The Not So Good

By William Keating, Ingenuity

• Global semi sales for April ’24 were $46.4 billion,  +15.8% YoY & +1.1% MoM
• WSTS now forecasts a 16.1% increase in 2024 semi sales, up from 13.1% in their previous forecast
• We think the WSTS forecast for Memory is too high & their forecast for Logic is too low. Excluding memory, the WSTS forecast reflects just 3.1% growth in 2024.

4. Computex 2024 & The Drama Of The CoPilot+ PC Launch

By William Keating, Ingenuity

• Intel, AMD & Qualcomm all lined up in support of Microsoft’s CoPilot+ PC program during the Computex 2024 keynotes last week.  
• While Qualcomm is all in and AMD mostly too, Intel’s support is more passive agressive in nature. We outline how & why this is the case
• On Friday June 7, reacting to customer feedback, Microsoft announced that their CoPilot+ Recall feature will now become disabled out of the box by default. Ouch!

5. Taiwan Semis May ’24 Revenue Roundup. Looking Good Across The Board

By William Keating, Ingenuity

• ASPEED blazing a trail with 92.9% YoY revenue growth in May
• Quanta, WiWynn, TSMC and Nanya all > 30% YoY revenue growth in May
• TSMC looking likely to exceed 30% YoY revenue growth in 2024

6. Intel Warns That Its Foundry Strategy Is “Highly Risky” & Its Success Is “Highly Uncertain”

By William Keating, Ingenuity

• Intel’s 2023 10K includes two new risk sections relating to its foundry plans and Smart Capital approach to funding them. 
• It labels its foundry plan as “Highly Risky” and rates its chances of success as “highly uncertain”
• They also helpfully warn that they have “limited experience” with the third party foundry business, just FYI

7. Taiwan Tech Weekly: Apple Unveils New AI Capabilities at WDC; PC Makers Feel the Love from Chip CEOs

By Vincent Fernando, CFA, Zero One

• Apple Announces New AI Features at WDC; Shares Surge to New All-Time Highs
• Top Movers: Major Computex Exhibitors See Share Prices Fall Despite Strong Presence
• Computex 2024: Chip Companies Notably Competing to Win PC Makers

8. TSMC (2330.TT; TSM.US): CoWoS Demand Continues to Increase in 2024.

By Patrick Liao

• The yearly growth target could approach 25% YoY in 2024.
• TSMC’s CoWoS demand continues to rise, with capacity expected to increase by approximately another 5% in 2024.
• TSMC’s stock price has risen by 55% in Taiwan and by 66.3% in US markets this year. We believe it has the potential to continue increasing further.

1. Lasertec. Colossal Fraud Or Multi-Award Winning Mask Inspection Supplier?

By William Keating, Ingenuity

• Activist short seller Scorpion alleges Lasertec is a “colossal fraud” and “ticking time bomb”
• Most of their allegations relate to problems with Lasertec’s EUV mask inspection tools
• Lasertec achieved Intel’s distinguished supplier ward for the past six years and last December landed an award from TSMC for  “Distinguished EUV Mask Inspection and Metrology Collaboration”. What gives?

2. TSMC (2330.TT; TSM.US): ASML’s High-NA EUV Machine Will Not Be Required Until 2027 at TSMC.

By Patrick Liao

• Taiwan Semiconductor (TSMC) – ADR (TSM US) is planning to launch its 2nm in 2025.   
• TSMC is expected to acquire one High-NA EUV machine this year for R&D purposes, but it will not be used for commercial production.
• TSMC is expected to increase the cost of its Chip-on-Wafer-on-Substrate (CoWoS) package by around 15% in 2H24.

3. The Internet as You Know It Is Dying

By Douglas O’Laughlin, Fabricated Knowledge

• If you pay attention, the Internet has been a bit different lately. Many of the attributes and ways we once interacted with the internet is changing.

• I probably noticed it the most when one of my favorite websites, subredditstats.com showed me this image the other day.

• Reddit’s free API is closing. But so is X (formerly Twitter), and other properties all around the internet are slowly adding limits and closing their doors.

4. Vanguard (5347.TT): Setup 12″ Fab in Singapore With 60% Stake, with NXP Investing Remaining 40%.

By Patrick Liao

• Vanguard announce the establishment of a 12” Fab in Singapore with 60% stake, with Nxp Semiconductors Nv (NXPI US) will invest remaining 40%.  
• The nodes produced will span from 40nm to 130nm, encompassing mixed-signal, PMIC, and analog ICs to support automotive, industrial, consumer, and mobile applications.  
• Vanguard will uphold a healthy cash balance, along with large debt and a follow-up cash offering.

5. Marvell Earnings

By Douglas O’Laughlin, Fabricated Knowledge

• Marvell had a pretty solid result and guided to sequentially better revenue.

• The market didn’t like this, but I thought, looking through the result, I liked this result quite a bit. Shares did not.

• Marvell Technology reports Q1 EPS $0.24 ex-items vs FactSet $0.24.

6. Intel’s Latest SCIP With Apollo. Yikes!

By William Keating, Ingenuity

• Apollo-Managed funds and affiliates will lead an investment of $11 billion to acquire from Intel a 49% equity interest in a joint venture entity related to Intel’s Fab 34
• This deal follows a similar mid-2022 deal with Brookfield to co-invest in two new leading edge fabs in Arizona at a cost of up to $30 billion
• Why make the deal with Fab 34 in Ireland instead of the Ohio fab under construction?

7. Silicon Box Or Silicon Black Box?

By William Keating, Ingenuity

• Silicon Box January series B funding round in January 2024 pushed the advanced packaging startup into Unicorn status with a >$1 billion valuation
• In addition to their Singapore based 70,000 sq metre facility, they announced a second, $3.6 billion investment in Italy in March 2024
• Despite their unicorn status and being in business for nigh on three years, we still have no specifics on the precise nature of the advanced packaging technology they are offering

8. Rohm (6963 JP): Negative Scenario Discounted

By Scott Foster, LightStream Research

• Japanese semiconductor equipment stocks have started to drop back, but device maker Rohm is already down 25% year-to-date and down 43% from its 52-week high. 
• Rohm’s operating profit fell 53% last fiscal year and management is guiding for a 68% decline in in FY Mar-25. Investment in power devices remains strong despite weak sales.
• 1H guidance is for an 80% year-on-year decline in operating profit on a 6% decline in sales. Buy into this weakness. Recovery should start in 2H.

1. Nvidia Earnings Overview: Networking in Focus

By Douglas O’Laughlin, Fabricated Knowledge

• Nvidia reported earnings, and as expected, they beat earnings. Did you think that Jensen would fail us now?

• On a more serious note, the guide was a bit light regarding buy-side bogeys, but there is almost nothing to complain about this result.

• Below is the StreetAccount summary, and you can see it’s a clean beat by every metric.

2. Qualcomm Leapfrogs Intel & AMD To Power The First Microsoft CoPilot + PCs

By William Keating, Ingenuity

• Microsoft last week launched their CoPilot+ PC category which enables their CoPilot to run locally on your PC, as long as it has an NPU with >40 TOPS
• With Qualcomm being the only one currently offering such an NPU, their Snapdragon processors will be powering the first wave of CoPilot+ PC’s
• It’s an extraordinary accomplishment for Qualcomm & likely an inflection point for Arm powered PCs. It’s also really bad news for Intel and not great for AMD

3. Taiwan Tech Weekly: TSMC’s Latest Sub-Industry Guidance; PC Names Strong; Computex & Apple WDC Ahead

By Vincent Fernando, CFA, Zero One

• TSMC’s Latest 2024E Industry Guidance Provided at Symposium in Taiwan
• More Potential Details on Nvidia & Mediatek’s AI PC Chip to Compete with Qualcomm & Intel
• Samsung’s HBM DRAM Chips Face Challenges in Meeting Nvidia’s AI Requirements

4. TechChain Insights: Call with Himax, How New In-Car Displays Can Quadruple Chip Content Per Vehicle

By Vincent Fernando, CFA, Zero One

• We hosted a conference call recently with Himax management, the global leader in automotive touch display controllers; the company is experiencing a uniquely stronger automotive supply/demand environment than some peers.
• Discussed in detail how larger or more sophisticated interior displays can drive higher dollar content of display controllers per vehicle. We examine trending new car designs with much larger displays.
• We forecast an exponential jump-up in display controller content value per vehicle as beautiful display designs are becoming key USP for auto brands; Maintain our Structural Long rating for Himax.

5. UMC (2303.TT; UMC.US): The Outlook for 2024 Could Show Flat to Low Single-Digit Growth.

By Patrick Liao

• UMC is currently forecasting a flat to low single digit growth QoQ for 3Q24, which is slight lower than consensus.
• UMC has received orders from domestic and international clients. However, we believe it couldn’t be able to compensate for the loss of Samsung’s 28nm orders so far this year.
• With accelerated construction in Singapore in 2024, the full-year capital expenditure has slightly risen to $3.3 billion.

6. Qualcomm. Watch This Space…

By William Keating, Ingenuity

• Automotive revenues for Q1CY24 amounted to $603 million, up 35% YoY. This compares to MobilEye’s revenue of $239 million, down 48% YoY
• Automotive design-win pipeline is now $45 billion, up from $30 billion less than two years ago
• CEO Amon said “Every time we enter a new market, we end up building a very strong position”. That’s a shot across the bows for Intel and AMD…

7. Tech Chain Insights: Call with ChipMOS, Memory and Display Markets Color

By Vincent Fernando, CFA, Zero One

• We hosted a conference call recently with ChipMOS management; the company continues to view 1Q24 as having been the bottom for the memory and display markets.
• Memory customers are increasing utilization further. Since ChipMOS does not significantly serve the HBM DRAM market, this indicates that previously softer non-HBM memory segments are now showing improvement.
• Display industry increasing utilization on expectation for 2H24 large display demand strength driven by sporting events such as the Paris Olympics. ChipMOS remains well below March highs, rate as Outperform.

8. An Interview with Dan Kim and Hassan Khan of the CHIPS Program Office

By Douglas O’Laughlin, Fabricated Knowledge

• I had the opportunity to talk about the CHIPS Act’s progress with two people at the program office.
• I really think this is a great step in the right direction, and we talk about some of the misconceptions of the CHIPS program, and more.
• Today will be a pretty special interview podcast, and I have Dan Kim and Hassan Khan from the CHIPS program.

9. Taiwan Tech Weekly: Computex & Apple WDC Imminent; Apple Releasing New AI Voice Interface for IPhone

By Vincent Fernando, CFA, Zero One

• Market Largely Influenced by Macro Trends and Nvidia Movements This Past Week
• Key Events: Computex, Apple WDC, Key Taiwan May Revenue Releases
• Apple (AAPL US) Is Overhauling Siri In Order to Create a Beautiful Voice-based AI Interface for the iPhone

1. Nvidia Up Sharply Again – Can This Last?

By Jim Handy, Objective Analysis

• Nvidia announced another sharp sales increase to $26 billion in quarterly revenues
• The company’s growth is far greater than hyperscaler CapEx growth, as standard servers yield to AI servers: Bad news for Intel & AMD
• Some of this may stem from an inventory build at the hyperscaler, which may lead to another Boom/Bust cycle similar to 2018 and 2022

2. Taiwan Dual-Listings Monitor: TSMC Spread Trading at New High Range, CHT Spread at Short Levels

By Vincent Fernando, CFA, Zero One

• TSMC: +17% Premium; Has Remained Above 15% for Over Nearly Two Weeks
• ASE: +11.8% Premium; We Continue to View 14%+ as Range to Short From
• CHT: +0.6% Premium; Can Consider Shorting the Spread at Current Level

3. AMAT. No Beat, No Raise, No Slump. But Why?

By William Keating, Ingenuity

• AMAT Q124 revenues of $6.65 billion, in line with guidance and essentially flat both QoQ and YoY. Current quarter guidance also flat sequentially
• WFE valuations are at all time record highs while revenues remain on life support from China
• If China revenues fall off before non-China returns to growth, the WFE segment could be in for a world of pain.

4. Hamamatsu Photonics (6965 JP): Look Cautiously to the Long Term

By Scott Foster, LightStream Research

• The company has slashed FY Sep-24 guidance after missing 1H sales and profit targets by wide margins. Dividend maintained, 2-for-1 split planned and buyback under consideration.
• Capex has been cut, reflecting lower growth expectations. R&D also. Inventory adjustments will eventually be completed, but Chinese competiton will remain a problem.
• The share price has dropped 30% in the past year and 10.5% since May 8, putting the shares on 27 times EPS guidance. Still not cheap, but getting there.

5. Silicon Wafer Q124 Review, CY24 Outlook & Earthquake Risk

By William Keating, Ingenuity

• Q124 silicon wafer area shipments amounted to 2,834 MSI, down 5% QoQ and down 13.2% YoY. 
• In revenue terms, the top 4 global manufacturers reported revenues of $2.2 billion, down 10.4% QoQ and down 20.8% YoY.
• Taiwan’s recent earthquake did not impact Globalwafers shipments due to high inventory levels. However, tools were damaged, highlighting the risk of having so much wafer production in earthquake prone countries

6. Earnings Subsystems (MKSI, ICHR, UCTT), Semicap (ONTO, CAMT, AMAT, TOELY), and SiTime

By Douglas O’Laughlin, Fabricated Knowledge

• Subsystems did the results you should expect, and MKSI did a questionable (and understandable) convertible offering that tanked shares right after.

• All subsystems (except Ichor which sucks) look to be in a much better spot.

• The summary is that Subsystems revenue should continue improving into the second half and that 2025 will be a strong year.

7. Vanguard (5347.TT): Planning to Announce the Construction of a 12″ Fab in Singapore in 2024.

By Patrick Liao

• Vanguard should declare to established 12″ Fab in Singapore within 2014.
• Vanguard is likely to announce the establishment of 2 sets of 12″ fabs in the next 6 months.  
• China is expanding 28/22nm and above technologies, and we believe it’s more appropriate for Vanguard to compete with others rather than TSMC.

1. TSMC Surges As April Revenue Soars 60% YoY

By William Keating, Ingenuity

• April revenue ~NT$236.02 billion, +20.9% MoM & + 59.6% YoY
• It was the company’s second highest monthly revenue ever, made all the more remarkable by the fact that it occurred during its seasonally low first half year
• Our April YoY Taiwan monthly revenue comps are flashing green across the board with just one exception, Globalwafers

2. Intel’s Foundry Chief Runs For The Hills

By William Keating, Ingenuity

• In a surprise move, Intel announced that its foundry chief Stuart Pann is to retire from the company effective end of May after just over one year in the role
• He will be replaced by former IBM, Globalfoundries and Marvell executive Kevin O’Buckley, effective immediately
• Mr. O’Buckley now has the dubious distinction of being the third leader of IFS in as many years. 

3. Asustek: Margin Beat, Guides More Upside; Qualcomm for AI PCs; Why Asus Confident in AI PC Up-Cycle

By Vincent Fernando, CFA, Zero One

• Asus’s 1Q24 earnings beat consensus by 46% thanks to major increase in operating margin driven by costs optimization. Adjusted Asus brand Op profit rose 227% YoY and 98% QoQ.
• Asus will host a major AI PC launch event May 21st, with additional AI PCs launched at Computex in Taiwan June 4th. Will feature Qualcomm Inc (QCOM US) Snapdragon processors.
• Asus confident in an PC upgrade cycle and has guided for sales to rise and margins to expand in the coming quarters. We maintain our Structural Long rating for Asus.

4. Hon Hai: Traditional Server Market Now Adding to AI Growth; Expects Market Share Gains in 2024E

By Vincent Fernando, CFA, Zero One

• Hon Hai reported 1Q24 revenue that fell 9% YoY, however the company reiterated its guidance for significant growth in 2024E and said growth now looks stronger than guided in March.
• Hon Hai’s cloud (including servers) business didn’t grow as much as guided due to material shortages; but AI server revenue up 200% YoY and significant growth is guided for 2024E.
• The traditional server market is rebounding, to grow double digits in 2024E. Hon Hai expects to take market share in 2024. Structural Long but near-term gains could be limited.

5. Himax: Signs of Automotive Demand Rebound; Why Demand Strength Is Different Than NXP and Infineon

By Vincent Fernando, CFA, Zero One

• Automotive display driver IC leader Himax reported 1Q24 results last week that were ahead of guidance. The company also guided for rising margins.
• Management believes 1Q24 represents a cyclical bottom for the company’s financial performance and expects automotive demand to rise in 2H24E.
• Himax rallied but remains 55% below its 2021 highs, yet its market opportunity larger than ever. Himax could be benefitting from different positioning within automotive chips than NXP & Infineon.

6. Optics Earnings (FN, ANET, COHR, LITE, AAOI)

By Douglas O’Laughlin, Fabricated Knowledge

• To make my content readable, this is an optics-only earnings update.
• I will discuss everything together and put together a high-level overview.
• The specific things I am interested in are Marvell’s ZR and custom silicon.

7. Taiwan Tech Weekly: All Eyes on Nvidia Results Next Week; Microsoft Copilot Edge AI To Be Showcased?

By Vincent Fernando, CFA, Zero One

• Taiwan Tech and Nvidia Rally Ahead of Nvidia Earnings Next Week; Microsoft Build Conference Could Showcase Edge AI Copilot
• Hon Hai: Traditional Server Market Now Adding to AI Growth; Expects Market Share Gains in 2024E 
• Asustek: Margin Beat, Guides More Upside; Qualcomm for AI PCs; Why Asus Confident in AI PC Up-Cycle 

8. Screen Holdings (7735 JP): Guiding for Lower Profits in H2

By Scott Foster, LightStream Research

• FY Mar-24 results were ahead of guidance, but management’s FY Mar-25 forecast has sales flat and profits down in the second half.
• The shares have dropped back 24% from their all-time high, bringing the forward P/E ratio down to 22X.
• China and foundry remain strong while North America and memory pick up. Guidance is probably conservative. Buy into the weakness.

9. Semiconductor Memory. Profits Return & Tailwinds Mount On Surging (& Very Similar) ASP Increases

By William Keating, Ingenuity

• Q124 DRAM revenue $18.2 billion, up 6% QoQ and up 88% YoY. NAND revenue $14.1 billion, up 23.4% QoQ and 68.8% YoY
• ASP increases, HBM, NAND for enterprise SSD and looming shortages for legacy products are all mounting tailwinds for the beleaguered memory segment
• First quarter ASP increases for DRAM & NAND for Micron, SK Hynix & Samsung were almost identical. That’s quite a coincidence..

10. Silergy (6415.TT): Rebounding from the Bottom in 1Q24, It Will Witness Normal Orders Since 2Q24.

By Patrick Liao

• Inventory levels were at 90 days by the end of 1Q24, returning to a normal level.   
• It is expected to see consecutive QoQ growth throughout 2024, with normal orders observed since 2Q24. 
• Although Chinese mature technology is advancing, current analog capacity still falls short of local demand in China.

1. Taiwan Dual-Listings: TSMC Spread Slumps Then Fully Rebounds; Shorts Spiking Ahead of IMOS Results

By Vincent Fernando, CFA, Zero One

• TSMC: Premium Fell and Then Rebounded, Now +15.6%; Can Consider Shorting Again
• ASE: Falls to +12.3%; Wait for Higher Level Before Considering a New Short Again
• ChipMOS: -0.6% Discount; Massing of Short Interest Right Ahead of Earnings

2. Taiwan Tech Weekly: Hon Hai New All-Time Highs; Asustek Soars; Leading Chip Testing Firm Exits China

By Vincent Fernando, CFA, Zero One

• Taiwan Tech Rallies Along With Rebound In Global Tech; Hon Hai, Asustek Top Gainers; KYEC a Top Loser After Announcing China Market Divestment
• PC Monitor: The Next Version of MSFT CoPilot Will Be the Killer App for a Global AI PC Upgrade Cycle 
• ASMedia GDR Early Look – Momentum Has Been Strong, and Raising Would Grow Its Cash Base Almost 6x 

3. Silicon Motion: Leader in Powerful Niche for Edge AI Memory; Plus Key Wins for Data Center Solution

By Vincent Fernando, CFA, Zero One

• Silicon Motion’s lQ24 results confirmed the company’s end-demand strength as implied by previous Samsung and SK Hynix management commentary re: solid state memory.
• Management has increased 2024E guidance, citing rising ASPs and strong demand due to its memory controller products’ usage in edge AI applications such as AI PCs and AI smartphones.
• The street upgraded target prices across the board after the results; however we note the stock remains below its past acquistion offer price by Maxlinear and we see further upside.

4. KLAC. Priced For Perfection In 2025 & Beyond

By William Keating, Ingenuity

• Q124 revenues of 2.36 billion, $60 million above the guided midpoint, down 5% QoQ and down 3% YoY.
• Current quarter revenue guidance of $2.5 billion representing a ~6% QoQ increase and about the same YoY.
• Share price close to record highs yet CY2024 outlook is tepid while the massive over reliance on China just keeps on going

5. SMIC (981.HK): 1Q24 Outlook Was Improved, and The 2Q24 Outlook Appears to Be Better than 1Q24.

By Patrick Liao

• It’s an exciting 1Q24 result that revenue and GM beat the prior guidance.
• The 2Q24 outlook appears to be better than 1Q24, with revenue expected to increase by 5% to 7% QoQ and GM by 9% to 11%.
• We consider the primary bottleneck is the embargo of EUV machines to China from the Netherlands.

6. KYEC (2449.TT): 1Q24F Was a Seasonal Dip, but 2Q24F Should Be Picking up Below 5% QoQ.

By Patrick Liao

• In 1Q24, it was reported that the revenue growth was -3.35% QoQ, slightly exceeding our expectation of a 5% QoQ decline.
• For 2Q24, revenue is expected to grow, but the increase is projected to be less than 5% QoQ.  
• NVIDIA revenue in KYEC is forecasted to reach 15% by the end of 2024F, up from about 2% in 2023, driven by the increasing demand for AI.

7. GlobalWafers (6488.TT): Demand Was Weaker in 1H24F, and We Hope It Will Be Better in 2H24F.

By Patrick Liao

• 1Q24 revenue and GM are in line, but operating income at 24.3% was 1% below consensus.
• GlobalWafers anticipates revenue in 2024 will likely be similar to 2023, which means 1H24 revenue could account for 45% of the 2024 yearly revenue.
• The planned dividend payout for 2024 is NT$19.0, with NT$8.0 from 1H23 and NT$11 from 2H23. 

8. Novatek (3034.TT): 1Q24 Sales Inline; 2Q24F Sales Guidance Below Consensuses

By Patrick Liao

• The 2Q24 revenue outlook is NT$24.4-25.5bn, which was below Bloomberg consensuses NTD$26.45bn. 
• The company sees more aggressive stocking for TVs in 2Q24, but smartphone demand is soft in 2Q24.  
• The dividend payout rate has been maintained at 80-85% over the past few years, with no significant changes expected.  

9. AMD’s MI300 Disappointment, Hyperscalers Capex, and FPGAs

By Douglas O’Laughlin, Fabricated Knowledge

• I will start with a AMD section. Shares are down ~6-7% on last week’s result. Let’s talk about the result and why it was so disappointing.

• AMD exactly matched EPS, was slightly light on revenue, and guided essentially in line with Q2 guidance.

• This also was one of the slightest EPS and revenue beats in recent years. The last time this happened, the PC segment was imploding. This time it’s embedded revenue.

10. Mitsubishi Heavy Industries (7011 JP): Orders Momentum Has Peaked

By Scott Foster, LightStream Research

• MHI was sold off last week as FY Mar-24 operating profit fell short of guidance and management guided for a decline in new orders this fiscal year.
• Orders momentum has peaked. Sales and profits will follow. But the latter are still rising and guidance could once again be conservative.
• Consolidation of the share price is likely to continue until orders and profit trends are confirmed.

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.