Weekly Top Ten Tech Hardware and Semiconductor – Aug 11, 2024

1. MARKETS AND SEMICONDUCTORS

By Douglas O’Laughlin, Fabricated Knowledge

• Hello! I went on a short hike this weekend, which always seems to cause something to change.
• What changed was that we are seeing a very large leveraged unwind in the market, driven by the BOJ’s hike in interest rates.
• Let me write out the series of events. First and foremost, last week, we saw some of the first macro jitters. The CPI came to light, which was viewed as positive. But then NFP showed a bit of weakness.

2. Taiwan Dual-Listings Monitor: TSMC and ASE Premiums Break Down Again; ASE Spread Near 1-Year Lows

By Vincent Fernando, CFA, Zero One

• TSMC: Premium Breaks Back Down to +8.3%; 5-15% Could Now Be the Key Range
• UMC: -2.2% Discount; Good Level to Go Long the Premium
• ASE: Premium Breaks Down Again, Now Only +1.5%; Consider Going Long

3. Taiwan Tech Weekly: Tough Start for Nvidia and Apple Supply Chains; Asustek, Novatek Results Ahead

By Vincent Fernando, CFA, Zero One

• Tough Start to the Week — Negative News for Nvidia and Apple Supply Chains
• Key Events: Asustek & Novatek Results; Mediatek & TSMC July Sales Data
• UMC Signals Non-AI Industry Inventory Correction Through 2024E; Why Intel Is Increasingly Important 

4. PC Monitor: Promising Uptake of Microsoft Copilot and AI Services; Remain Structurally Long

By Vincent Fernando, CFA, Zero One

• Given market concerns that AI is overhyped and not yet delivering sufficient value, we analyze Microsoft’s Copilot disclosures and examine signs of AI services traction among corporate clients.
• Signs indicate that Copilot is gaining substantial traction with corporate clients, adding value to software development, business operations, and healthcare documentation functions.
• The number of organizations paying for MSFT’s AI services is expanding rapidly. We view this as a promising indicator of increased AI adoption and substantial value creation.

5. GlobalWafers (6488.TT): Semi Industry Expected to Recover in 2H24, Holding an Bright Outlook in 2025

By Patrick Liao

• The 2Q24 revenue was NT$15.3bn, 1.6% QoQ and -14.4% YoY. GM in 2Q24 was 32.3%, -5.8% QQ and -14.3% YoY. OPM in 2Q24 was 22.0%, -16.3% QoQ and -24.1% YoY.
• The widespread adoption of AI-driven electronic devices, along with the onset of the AI-powered device replacement cycle, is likely driving increased demand for peripheral ICs and sensors. 
• With inventory levels gradually depleting and downstream customers ramping up production capacity in 2025, the semiconductor industry is expected to recover in 2H24 and maintain an optimistic outlook for 2025.

6. Asustek & Acer Key Takeaways: Strong July Revenue Growth and ‘New Product Life Cycle’ Starting 3Q24

By Vincent Fernando, CFA, Zero One

• Strong Revenue Growth Signals Robust Demand in PC and Server Markets for Asustek and Acer
• Asus Management Continues to Describe Multi-Year PC Growth Cycle Ahead; 3Q24 Will Be Start of ‘New Product Lifecycle’
• Visit to Guang Hua Digital Plaza to Review New PC Models First-Hand. Remain Structurally Long PC Makers; Acer, Asus, Dell.

7. Silicon Motion 2Q24 Results Take-Aways: Strong Growth & NAND Flash Market Share Gains Expected

By Vincent Fernando, CFA, Zero One

• Silicon Motion reported 2Q24 results on Friday, describing strong demand for NAND flash controllers driven by the PC industry and improving demand from the smartphone industry.
• The company expects industry NAND flash pricing to continue improving into 2025E. Moreover, SIMO expects to expand its market share for NAND flash controllers by year-end.
• Maintain Structural Long rating for SIMO. The recent share price decline is painful for holders however share weakness is an accumulation opportunity with an investment view to mid-2025E.

8. TSMC July Revenue Surges 44.7% YoY, Sets A New Record Monthly High

By William Keating, Ingenuity

• TSMC July revenues of NT$256.95 billion, +23.6% MoM & + a whopping 44.7% YoY
• Q224 silicon area wafer shipments amounted to 3,035 MSI, up 7.1% QoQ but down 8.9% YoY
• Q224 semiconductor sales reached $149.9 billion, +6.5% QoQ and +18.3% YoY.

9. Novatek (3034.TT): 3Q24 Guidance Slightly Weak in GM

By Patrick Liao

• The 3Q24 revenue is expected 10.5% higher than 2Q24, but the GM/OPG outlook will be 5.1%/3.6% lower because of pricing adjustments and limited NRE sales .  
• Smartphone’s demand will enter peak season with expected stockpiling for new models. Automotive inventory adjustment is needed due to muted demand.  
• Dividend payout ratio has remained at 80-85% in recent years, with no major changes expected.

10. SMIC (981.HK): Revenue and GM Continued to Trend Up in 3Q24

By Patrick Liao

• Expected sequential revenue growth of 13% to 15%, gross margin expected between 18% and 20%.
• The company has not increased capacity utilization through price cuts but supports customers in facing competition to maintain market share.
• Inventory replenishment behavior will end in the third quarter, and fourth-quarter orders will more accurately reflect actual demand rather than the impact of restocking.