Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Equity Bottom-Up

<ul>
<li>Signal #1 -- Micron's CFO warns that margins will be coming in lower than expected and inventories will remain elevated through FY2023E.</li>
<li>Signal #2 -- South Korea semiconductor inventories jump 28% MoM, 39.5% YoY.</li>
<li>Implications for memory chip manufacturers: Biased to Long Micron vs. Short Nanya.</li>
</ul>


Signal #1 -- Micron's CFO warns that margins will be coming in lower than expected and inventories will remain elevated through FY2023E.
Signal #2 -- South Korea semiconductor inventories jump 28% MoM, 39.5% YoY.
Implications for memory chip manufacturers: Biased to Long Micron vs. Short Nanya.


Memory Monitor: Latest Two Signals Show Inventory Problems Worsening; Long Micron Vs. Short Nanya

<ul>
<li>ChipMOS results missed expectations with capacity utilization falling, dragging down profitability.</li>
<li>The company sees 1Q23E as the bottom for its performance, followed by a 2Q23E rebound. However, it says it believes the Memory industry may take longer to recover.</li>
<li>We believe ChipMOS is cheap if one looks through the cycle, and it is relatively unloved by the Street hence the expectations bar is set low.</li>
</ul>


ChipMOS results missed expectations with capacity utilization falling, dragging down profitability.
The company sees 1Q23E as the bottom for its performance, followed by a 2Q23E rebound. However, it says it believes the Memory industry may take longer to recover.
We believe ChipMOS is cheap if one looks through the cycle, and it is relatively unloved by the Street hence the expectations bar is set low.


ChipMOS: Semiconductor Packaging & Testing Signs of Recovery, Cheap Through Cycle

TSMC (Taiwan Semiconductor Manufacturing) / Equity Bottom-Up

TSMC (Taiwan Semiconductor Manufacturing) (TSM US)

TSMC (Taiwan Semiconductor Manufacturing)

<ul>
<li>The U.S. is reportedly working to implement China semiconductor restrictions with South Korean firms, after doing the same with Japanese and Dutch firms.</li>
<li>Nanya management sees a bottom for Memory prices in 1Q23E; we look at Long Micron vs. Short Nanya.</li>
<li>Firms are significantly expanding semiconductor capacity in Singapore, with the latest being Applied Materials and French firm Soitec.</li>
</ul>


The U.S. is reportedly working to implement China semiconductor restrictions with South Korean firms, after doing the same with Japanese and Dutch firms.
Nanya management sees a bottom for Memory prices in 1Q23E; we look at Long Micron vs. Short Nanya.
Firms are significantly expanding semiconductor capacity in Singapore, with the latest being Applied Materials and French firm Soitec.


Taiwan Tech Weekly: U.S. Pushing South Korea China Restrictions, Nanya Says Memory Bottom in 1Q23E

<ul>
<li>Long Micron vs. Short Nanya - We remain biased to Long Micron vs. Nanya Technology based on multiple factors.</li>
<li>Relative valuation and inventory management appears to favor Micron. Nanya Technology's inventory days blow-out increases risk of write-downs impacting its next earnings.</li>
<li>Potential news flow also appears to favor Micron as the US CHIPS Act rolls out.</li>
</ul>


Long Micron vs. Short Nanya - We remain biased to Long Micron vs. Nanya Technology based on multiple factors.
Relative valuation and inventory management appears to favor Micron. Nanya Technology's inventory days blow-out increases risk of write-downs impacting its next earnings.
Potential news flow also appears to favor Micron as the US CHIPS Act rolls out.


Memory Monitor: Long Micron Vs. Short Nanya Technology; Nanya Relatively Over-Valued

<ul>
<li>We're now two-thirds through the Taiwan Semiconductor earnings season and about one-third through the Taiwan Hardware earnings season.</li>
<li>Semiconductor gross margins declines have been relatively large, and we believe are tracking to be worse than what consensus expected going into the earnings season.</li>
<li>There have been few examples of inventory situations improving for semicondcutor companies; results data released so far indicates a potentially deeper trough than previously expected.</li>
</ul>


We're now two-thirds through the Taiwan Semiconductor earnings season and about one-third through the Taiwan Hardware earnings season.
Semiconductor gross margins declines have been relatively large, and we believe are tracking to be worse than what consensus expected going into the earnings season.
There have been few examples of inventory situations improving for semicondcutor companies; results data released so far indicates a potentially deeper trough than previously expected.


Taiwan Semiconductors Mid-Earnings Season Review: Margins, Inventories Appear Worse Than Expected

Taiwan

Nanya Technology Corp. manufactures and markets dynamic random access memories (DRAMs).  The Company sells its products in Taiwan and exports worldwide.

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Nanya Technology (2408 TT)

Memory Monitor: Latest Two Signals Show Inventory Problems Worsening; Long Micron Vs. Short Nanya

Signal #1 -- Micron's CFO warns that margins will be coming in lower than expected and inventories will remain elevated through FY2023E.

Vincent Fernando, CFA

ChipMOS: Semiconductor Packaging & Testing Signs of Recovery, Cheap Through Cycle

The company sees 1Q23E as the bottom for its performance, followed by a 2Q23E rebound. However, it says it believes the Memory industry may take...

Vincent Fernando, CFA

Taiwan Tech Weekly: U.S. Pushing South Korea China Restrictions, Nanya Says Memory Bottom in 1Q23E

Firms are also significantly expanding semiconductor capacity in Singapore, with the latest being Applied Materials and French firm Soitec.

Vincent Fernando, CFA

Memory Monitor: Long Micron Vs. Short Nanya Technology; Nanya Relatively Over-Valued

Relative valuation and inventory management appears to favor Micron. Nanya Technology's inventory days blow-out increases risk of write-downs...

Vincent Fernando, CFA

Taiwan Semiconductors Mid-Earnings Season Review: Margins, Inventories Appear Worse Than Expected

Other than comments from some companies saying they expect a 2H23E recovery in their guidance, results data released this season so far indicates a...

Vincent Fernando, CFA

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