Asia and Global Semiconductor and Tech Research

Andrew Lu

Equity Bottom-Up

Taiwan Semiconductor (TSMC) / Equity Bottom-Up

<ul>
<li>TSMC expects 2024 semi sector in recovery with 20-25% y/y growth itself, driven by AI customers. By controlling capex, more rooms to raise dividends but no growth for equipment vendors.</li>
<li>Faster ramp on N3, likely N3E, N3P than competitor's. TSMC expects 3nm from 6% of sales in 3Q23, 12.7% in 4Q23 to 15% in 2024, 3x y/y increase in 2024. </li>
<li>TSMC reports a nearly 30% q/q drop on IOT and consumer IC demand and sees weakness on 12" mature technology despite better demand 8" specialty technology. </li>
</ul>


TSMC expects 2024 semi sector in recovery with 20-25% y/y growth itself, driven by AI customers. By controlling capex, more rooms to raise dividends but no growth for equipment vendors.
Faster ramp on N3, likely N3E, N3P than competitor's. TSMC expects 3nm from 6% of sales in 3Q23, 12.7% in 4Q23 to 15% in 2024, 3x y/y increase in 2024. 
TSMC reports a nearly 30% q/q drop on IOT and consumer IC demand and sees weakness on 12" mature technology despite better demand 8" specialty technology. 


What Stories TSMC Investor Conference Telling Us About Customers, Supply Chains, and Competitors

Equity Long-Short, Semiconductors, Fabricated Knowledge

Douglas O'Laughlin

Equity Long-Short, Semiconductors

Fabricated Knowledge

Learn more about the world's most important manufactured product. Meaningful insight, timely analysis, and an occasional investment idea.

Thematic (Sector/Industry)

<ul><li>The year 2023 began with a significant downturn in the semiconductor market.</li><li>Significant capacity additions were brought on after the historic shortages due to COVID-19, and then demand wobbled as interest rates quickly rose.</li><li>Supply outpaced demand, and the market turned into a period of oversupply.</li></ul>

The year 2023 began with a significant downturn in the semiconductor market.Significant capacity additions were brought on after the historic shortages due to COVID-19, and then demand wobbled as interest rates quickly rose.Supply outpaced demand, and the market turned into a period of oversupply.

Semiconductor Outlook 2024: AI's Adolescence

<ul><li><p>Semicap is strong, Subsystems are not. That will change.</p></li><li>I think <a href="https://www.smartkarma.com/entities/mks-instruments-inc" target="_blank" data-smartkarma-citation="entities:5970" rel="noopener">Mks Instruments (MKSI US)</a>, <a href="https://www.smartkarma.com/entities/ultra-clean-holdings-inc" target="_blank" data-smartkarma-citation="entities:19849" rel="noopener">Ultra Clean Holdings (UCTT US)</a>, and <a href="https://www.smartkarma.com/entities/ichor-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26449" rel="noopener">Ichor Holdings (ICHR US)</a> are likely good 12+ month longs as NAND spending increases, and they blow out estimates for multiple quarters in a row.</li><li>The factor-driven size difference drives the opportunity, and they should benefit well on a relative basis next year.</li></ul>

Semicap is strong, Subsystems are not. That will change.I think Mks Instruments (MKSI US), Ultra Clean Holdings (UCTT US), and Ichor Holdings (ICHR US) are likely good 12+ month longs as NAND spending increases, and they blow out estimates for multiple quarters in a row.The factor-driven size difference drives the opportunity, and they should benefit well on a relative basis next year.

<ul>
<li>SEMI reports September front end and back end test/assembly equipment sales decline of 18% and 25% y/y, respectively, resulting 3Q23 sales decline of 17% and 28% y/y.</li>
<li>However, WSTS/SIA and US ISM Purchasing Managers Index reported more moderate 7% y/y decline in August global semi sales and 4% y/y decline in September index. </li>
<li>The discrepancy is due to global semi vendors are seeing PC and Smartphone IC improvement but need to consume earlier overbuilt inventories first before boosting in house or foundries' capex.</li>
</ul>


SEMI reports September front end and back end test/assembly equipment sales decline of 18% and 25% y/y, respectively, resulting 3Q23 sales decline of 17% and 28% y/y.
However, WSTS/SIA and US ISM Purchasing Managers Index reported more moderate 7% y/y decline in August global semi sales and 4% y/y decline in September index. 
The discrepancy is due to global semi vendors are seeing PC and Smartphone IC improvement but need to consume earlier overbuilt inventories first before boosting in house or foundries' capex.


What Sep US SEMI Equipment and Aug SIA/WSTS Global Sales Y/Y Discrepancy Tells Us?

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/kokusai-electric-corp" target="_blank" data-smartkarma-citation="entities:40152:1" rel="noopener">Kokusai Electric (6525 JP)</a>'s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.</li>
<li>At the reported indicative IPO price of JPY 1890/share, <a href="https://www.smartkarma.com/entities/kokusai-electric-corp" target="_blank" data-smartkarma-citation="entities:40152:1" rel="noopener">Kokusai Electric (6525 JP)</a> will be valued at JPY 435bn (US$2.94bn).</li>
<li>The stock should be added to the <a href="https://www.smartkarma.com/entities/tokyo-stock-exchange-tokyo-price-index-topix" target="_blank" data-smartkarma-citation="entities:22910:1" rel="noopener">TPX INDEX</a> at the close on 29 November where trackers will need to buy over 14% of the stock issued in the IPO.</li>
</ul>



Kokusai Electric (6525 JP)'s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 25 October.
At the reported indicative IPO price of JPY 1890/share, Kokusai Electric (6525 JP) will be valued at JPY 435bn (US$2.94bn).
The stock should be added to the TPX INDEX at the close on 29 November where trackers will need to buy over 14% of the stock issued in the IPO.


Kokusai Electric (6525 JP) IPO: Listing in October, TPX Inclusion in November, Global Indices Later

United States

Applied Materials, Inc. develops, manufactures, markets, and services semiconductor wafer fabrication equipment and related spare parts for the worldwide semiconductor industry.  The Company's customers include semiconductor wafer and integrated circuit manufacturers, flat panel liquid crystal displays, solar photovoltaic cells and modules and other electronic devices manufacturers.

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Applied Materials (AMAT US)

What Stories TSMC Investor Conference Telling Us About Customers, Supply Chains, and Competitors

What Stories TSMC Investor Conference Telling Us About Customers, Supply Chains, and Competitors; TSMC expects 2024 semi sector in recovery with 20...

Andrew Lu

Semiconductor Outlook 2024: AI's Adolescence

Its time to jog your memory. We've gone through the downturn, what does an upturn look like? The year 2023 began with a significant downturn in the...

Fabricated Knowledge

Why Subsystems Now

I think MKSI, UCTT, and ICHR are likely good 12+ month longs as NAND spending increases, and they blow out estimates for multiple quarters in a row.

Fabricated Knowledge

What Sep US SEMI Equipment and Aug SIA/WSTS Global Sales Y/Y Discrepancy Tells Us?

Sep US SEMI Equipment and Aug SIA/WSTS Global Sales Y/Y Discrepancy Tells Us global semi vendors are consuming earlier overbuilt inventories first...

Andrew Lu

Kokusai Electric (6525 JP) IPO: Listing in October, TPX Inclusion in November, Global Indices Later

Kokusai Electric starts trading today. Initial passive demand will come from TOPIX trackers next month. Flow from global passive trackers will come...

Brian Freitas

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