Semi Majors

By pjain      Published July 24, 2020, 5:58 p.m. in blog Invest   

Semiconductor Key Factors

Outsourcing to Fabs dominates

Outsourcing is the norm in the $400 billion industry nowadays,

Design vs Commodity Technology

Design can only do so much for semiconductor performance. The manufacturing step is crucial to ensuring these components can store more data, process information faster and use less energy. Combining the two helped Intel improve both sides of its operation for decades.

--- Semiconductor Majors

NVDIA phE

  • Doing really good
  • Nvidia, which designs but does not make its own chips,

  • July 2020 overtook Intel as the most valuable U.S. chip supplier, thanks to strong sales to data centers using Nvidia chips for artificial intelligence work.

TSM c52.7 held

  • BEATS Q1'20 Strong earnings 4/18/20
    • $ 10.3b y+45% profits 75c/ADR exp 69c, gm=51.8%, op=41%
    • High Perf semis for data centers, cloud-computing companies
    • the continued ramp of 5G smartphones
  • Q2'20 guide $10-10.4b cons $9.65b gm=51%
    • Weaker mobile product demand (phone) while 5G infra ramps up
    • Data centers to continue/// on WFH
  • Foundry sector to be low single digits - tsm to beat mid teens growth

Focus on Scale and Best Tech - beyond design

TSM has succeeded by just focusing on production and leaving the design to other companies. Its factories have passed Intel in capabilities, scale and bleeding edge technology.

Apple, Nvidia, AMD get first in production

TSMC’s other customers, who compete with Intel, would likely oppose the Taiwanese company prioritizing Intel’s designs, he said.

INTC x

Bean counters low innovation

Swan, a former CFO who took the CEO role.

  • lost GPUs to nvda
  • cannot get out of fabs like - amd
  • couldn't keep apple vs QCOM

Behind on Tech: 7nm 1 yearBehind TSM

  • 10nm 2017 to 3 year delay. Intel’s current best technology, known as 10 nanometer in the industry, was scheduled to appear in 2017 and is only now making it into high-volume production.

7/23/20 Said its new 7-nanometer chip technology was six months behind schedule and it would consider farming out more work to outside semiconductor foundries, eroding a founding principle that manufacturing is key to its success. - It will cause a years-long domino effect, delaying chips meant to counter the rise of rivals Advanced Micro Devices Inc and Nvidia Corp until late 2021 or even 2023. - "We're going to be pretty pragmatic about if and when we should be making stuff inside or making outside, and making sure that we have optionality to build internally, mix and match inside and outside, or go outside in its entirety if we need to, ." . specifically Intel's "Ponte Vecchio," a data center graphics chip meant to compete with Nvidia, will not be released until late 2021 or early 2022 and could use outside chip factories. -- CEO Bob Swan - This caused a 10% drop to $50/sh

May outsource production - July 2020

For 50 years Intel has combined chip design with in-house production. Supposedly it had BETTER technology.

Intel's past technical CEOs lauded Intel’s factories and spent billions of dollars a year keeping up with the latest manufacturing technology. Outsourcing that to another company may mean Intel never catches up again.

  • However, Intel will be forced to pay billions to "others" persuade significant production. TSMC just doesn’t have the capacity. TSMC would probably be reluctant to build lots of new production capacity for Intel when there’s a chance the U.S. company may switch back to its own factories later.

SEG: CPUs for PCs $9.5b q2'20 exp $9.1b

  • But June 2020 Apple said it would end its reliance on Intel chips for Mac computers after nearly 15 years. Apple uses chip technology from SoftBank Group Corp-owed Arm Ltd.

SEG: Data Centers $7.1b q2'20 exp $6.6b

  • Intel is the top supplier for processors for PCs and data centers In recent years, Intel has relied on booming growth in data centers that power cloud computing as PC sales declined, though both segments have expanded as the pandemic forced increased technology spending to facilitate working from home.

  • PROBLEM: Nvidia, AMD and TSMC are challenging the logic of Intel's business model as a both a designer and manufacturer of its own chips.

SEG: AI chips - Intel far behind nvidia

Nvidia, which designs but does not make its own chips, earlier this month overtook Intel as the most valuable U.S. chip supplier, thanks to strong sales to data centers using Nvidia chips for artificial intelligence work.

Q3'20 - outlook est $18.2b e1.1 , updated FY'20 $75b

Q2'2020 GM% fall - $19.7 e 1.23 exp 18.55b/1.11

AMD phe

Q2'20

  • Doing really good - intel fighting it with low pricing
  • Announced new PC chips that analysts expect to be powered by TSMC's manufacturing processes.

MU - RAMs, SD

  • Huawei/China/Asia - HUGE uprise
  • High Perf semis for data centers, cloud-computing companies
  • High PC sales/laptops
  • SLOWdown on automotive components
  • Benefits from lower attention to sanctions/tariffs as CoV

AVGO y3.5% DE=1.7 fpe=13x Pay>100% - 5y$53% e40% TightMgt RollupAcqs=Risk

---- Controller Semis

MCHP

VSH

ON

---- Analog Semis, Passives

NXPI - strong in Auto-chips

MXIM

ADI

TXN x No revenue growth

Kemet Semi

A leader in capacitors that’s trading at $18.13, down from $30 a year ago

---- Other Semis

QRVO

STM


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