Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

Equity Bottom-Up

SMIC (Semiconductor Manufacturing International Corp) / Equity Bottom-Up

SMIC (Semiconductor Manufacturing International Corp) (981 HK)

SMIC (Semiconductor Manufacturing International Corp)

The US Department of Commerce has added SMIC to its Entity List with the intent of limiting the company's access to US technology.  This Smartkarma Insight explores what that might mean to the company, to  China's national semiconductor efforts, and to SMIC's US-based tool suppliers.

The US Department of Commerce has added SMIC to its Entity List with the intent of limiting the company's access to US technology.  This Smartkarma Insight explores what that might mean to the company, to  China's national semiconductor efforts, and to SMIC's US-based tool suppliers.

Semiconductor & Technology Specialist, Ingenuity

William Keating

Semiconductor & Technology Specialist

Ingenuity

Our focus is exclusively on in-depth research & consulting in the broader semiconductor industry. We focus on the key players, namely Intel, Micron, Qualcomm, Apple, Samsung, NVIDIA, AMD, TSMC & Global Foundries - as well as some of the lesser known, but nonetheless critical, companies such as ASML (for EUV), Mellanox, Cavium, Xilinx etc. We specialise in their products, roadmaps, process technologies, competitive advantages & threats etc. We also help our clients understand the implications of new and emerging technologies, e.g. 3D X-Point, 3D NAND, Carbon Nanotubes, Autonomous Driving, Graphene, Silicon Photonics, Wafer-Level Optics, Artificial Intelligence, FPGA, GPU, ASIC etc. 

Semiconductor Analysis & Research

The much-anticipated acquisition by <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" data-smartkarma-citation="entities:5891:1" rel="noopener">NVIDIA</a> of <a href="https://www.smartkarma.com/entities/arm-holdings-plc" target="_blank" data-smartkarma-citation="entities:21816:1" rel="noopener">Arm</a> from <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank</a> was formally <a href="https://nvidianews.nvidia.com/news/nvidia-to-acquire-arm-for-40-billion-creating-worlds-premier-computing-company-for-the-age-of-ai" target="_blank" rel="noopener">announced</a> on Monday. The transaction is valued at $40 billion, an approximately equal combination of cash and NVIDIA stock.On the surface the deal looks strategically solid from NVIDIA's perspective. It places the company at the center of Arm's one hundred and eighty billion connected device ecosystem. Perhaps even more importantly, it opens up the possibility of an outright assault on <a href="https://www.smartkarma.com/entities/intel-corp" target="_blank" data-smartkarma-citation="entities:16764:1" rel="noopener">Intel's</a> data center dominance by adding Arm-based server processors to complement NVIDIA's existing lineup of GPUs and interconnect.Underneath the surface however, this deal is fraught with issues and risks. While Arm has been a very successful company, their growth is flatlining as smartphone sales stagnate. Furthermore, we see the rise of RISC-V as a very real threat to Arm's business model in the coming years. Arm has never competed with its customers. Under NVIDIA ownership, this will be virtually impossible to avoid.From a regulatory perspective, Arm IP moving under american ownership will raise the very real prospect that this technology will become a future weapon in the US-China trade and technology wars. In today's environment, it's difficult to see why China would agree to facilitate that possibility.All in all we think this deal is not as good as it seems on the surface and that it will be practically impossible to get through the regulatory approval process.

The much-anticipated acquisition by NVIDIA of Arm from Softbank was formally announced on Monday. The transaction is valued at $40 billion, an approximately equal combination of cash and NVIDIA stock.On the surface the deal looks strategically solid from NVIDIA's perspective. It places the company at the center of Arm's one hundred and eighty billion connected device ecosystem. Perhaps even more importantly, it opens up the possibility of an outright assault on Intel's data center dominance by adding Arm-based server processors to complement NVIDIA's existing lineup of GPUs and interconnect.Underneath the surface however, this deal is fraught with issues and risks. While Arm has been a very successful company, their growth is flatlining as smartphone sales stagnate. Furthermore, we see the rise of RISC-V as a very real threat to Arm's business model in the coming years. Arm has never competed with its customers. Under NVIDIA ownership, this will be virtually impossible to avoid.From a regulatory perspective, Arm IP moving under american ownership will raise the very real prospect that this technology will become a future weapon in the US-China trade and technology wars. In today's environment, it's difficult to see why China would agree to facilitate that possibility.All in all we think this deal is not as good as it seems on the surface and that it will be practically impossible to get through the regulatory approval process. 

NVIDIA+Arm. Strategically Solid But Practically Impossible.

Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

The Trump administration is considering whether or not to add Semiconductor Manufacturing International Corp. (SMIC, 981 HK) to the Commerce Department's "Entity List" - the same mechanism that was used to restrict the export of American technology to Huawei. This would cause SMIC a great deal of inconvenience and further undercut American semiconductor production equipment (SPE) sales to China. A sword is hanging over the share prices of SMIC itself and leading American SPE makers including Applied Materials (AMAT), Lam Research (LRCX) and KLA (KLAC). Another act of economic war intended to cripple China's high-tech industries, it would also convince the Chinese government - if any further convincing is necessary - that eliminating dependence on American technology is an absolute necessity.Some form of retaliation also seems likely. Has anyone calculated the valuations of American listed companies assuming no further growth in sales in China, declining sales in China, or no sales in China at all? Not only high-tech is at risk.Potential beneficiaries include Japanese and European SPE makers including Tokyo Electron (8035 JP), Lasertec (6920 JP), Screen Holdings (7735 JP) and ASM International (ASM). American commentators have claimed that semiconductors cannot be produced without American technology, but that is not true.Nevertheless, the immediate concern is the impact of the U.S-China trade war on semiconductor capital spending, which in the short to medium term at least is negative for all concerned.

The Trump administration is considering whether or not to add Semiconductor Manufacturing International Corp. (SMIC, 981 HK) to the Commerce Department's "Entity List" - the same mechanism that was used to restrict the export of American technology to Huawei. This would cause SMIC a great deal of inconvenience and further undercut American semiconductor production equipment (SPE) sales to China. A sword is hanging over the share prices of SMIC itself and leading American SPE makers including Applied Materials (AMAT), Lam Research (LRCX) and KLA (KLAC). Another act of economic war intended to cripple China's high-tech industries, it would also convince the Chinese government - if any further convincing is necessary - that eliminating dependence on American technology is an absolute necessity.Some form of retaliation also seems likely. Has anyone calculated the valuations of American listed companies assuming no further growth in sales in China, declining sales in China, or no sales in China at all? Not only high-tech is at risk.Potential beneficiaries include Japanese and European SPE makers including Tokyo Electron (8035 JP), Lasertec (6920 JP), Screen Holdings (7735 JP) and ASM International (ASM). American commentators have claimed that semiconductors cannot be produced without American technology, but that is not true.Nevertheless, the immediate concern is the impact of the U.S-China trade war on semiconductor capital spending, which in the short to medium term at least is negative for all concerned.  

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<a href="https://www.smartkarma.com/entities/asm-international-nv" target="_blank" data-smartkarma-citation="entities:21096:1" rel="noopener">Asm International Nv (ASM NA)</a> is estimated to be trading at a 23% discount to NAV, off its recent narrowest of 15% last month, but elevated with respect to its one-year trading pattern. ASMI is also trading at an all-time high compared to 25.2%-held <a href="https://www.smartkarma.com/entities/asm-pacific-technology-ltd" target="_blank" data-smartkarma-citation="entities:15061:1" rel="noopener">Asm Pacific Technology (522 HK)</a> (ASMPT). 
Both companies released FY19 results last week with ASMI reporting a <a href="https://www.asm.com/Downloads/2019_Q4_Investor_presentation.pdf" target="_blank" rel="noopener">102% increase</a> in earnings to €329 million compared to a 71.9% <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0226/2020022600087.pdf" target="_blank" rel="noopener">decline</a> for ASMPT.  ASMI's share of net earnings from ASMPT amounted to €6mn, approximately flat compared to the third quarter.
As ASMI's earnings improve in direct contrast to ASMPT's decline, the shares of both companies have significantly bifurcated. 
The question is whether this elevated level should contract from here, or does the momentum remain with ASMI?

Asm International Nv (ASM NA) is estimated to be trading at a 23% discount to NAV, off its recent narrowest of 15% last month, but elevated with respect to its one-year trading pattern. ASMI is also trading at an all-time high compared to 25.2%-held Asm Pacific Technology (522 HK) (ASMPT). 
Both companies released FY19 results last week with ASMI reporting a 102% increase in earnings to €329 million compared to a 71.9% decline for ASMPT.  ASMI's share of net earnings from ASMPT amounted to €6mn, approximately flat compared to the third quarter.
As ASMI's earnings improve in direct contrast to ASMPT's decline, the shares of both companies have significantly bifurcated. 
The question is whether this elevated level should contract from here, or does the momentum remain with ASMI?

At the SPIE Advanced Lithography conference this week Applied Materials proved that the company has a clear vision of the future and the way that the company will support its customers' needs for advanced semiconductor processing equipment.

At the SPIE Advanced Lithography conference this week Applied Materials proved that the company has a clear vision of the future and the way that the company will support its customers' needs for advanced semiconductor processing equipment.

Applied Materials Shines at SPIE Conference

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)

US Government Puts the Squeeze on SMIC

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Jim Handy

NVIDIA+Arm. Strategically Solid But Practically Impossible.

The long-anticipated acquisition by NVIDIA of Arm Holdings (ARM LN)

William Keating

Sword of Trump Hanging Over SMIC

xxx The Trump administration is considering whether or not U.S. agencies are in discussions to determine whether Semiconductor Manufacturing...

Scott Foster

ASMPT's Disconnect With ASM NA

Asm International Nv (ASM NA) is estimated to be trading at a 23% discount to NAV, off its recent narrowest of 15% last month, but elevated with...

David Blennerhassett

Applied Materials Shines at SPIE Conference

At the SPIE Advanced Lithography conference this week Applied Materials proved that the company has a clear vision of the future and the way that...

Jim Handy

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