Technology / Semiconductor / Internet Research

Nicolas Baratte

Equity Bottom-Up

<ul>
<li>Over past year the price of Silicon Carbide wafers has declined by 50-60%, leading to the bankruptcy of Wolfspeed. The Western media tends to blame Chinese over-capacity and price cuts. </li>
<li>But all SiC firms have massively increased capacity: Infineon, Onsemi, STMicro. The vertical integration of the majors is also to blame: over-investments in a small market (rapidly growing, but small). </li>
<li>Who benefits? Nominally the big integrated vendors Infineon, Onsemi, Rohm, STMicro – but Power SiC is a small fraction of their revenues.</li>
</ul>


Over past year the price of Silicon Carbide wafers has declined by 50-60%, leading to the bankruptcy of Wolfspeed. The Western media tends to blame Chinese over-capacity and price cuts. 
But all SiC firms have massively increased capacity: Infineon, Onsemi, STMicro. The vertical integration of the majors is also to blame: over-investments in a small market (rapidly growing, but small). 
Who benefits? Nominally the big integrated vendors Infineon, Onsemi, Rohm, STMicro – but Power SiC is a small fraction of their revenues.


Automotive Power SiC: The Bankruptcy of Wolfspeed

<ul>
<li>Revenues are still declining by ~teens% YoY but margins shows signs of improvements as end-demand improves and utilization is low. </li>
<li>Renesas doesn’t have an inventory problem and increasing revenues will lead to higher utilization and higher margins. </li>
<li>As Renesas is showing signs of a bottom, the stock is very cheap, trading at -2 standard deviations or 11x 2025 EPS, 9x 2026 EPS.</li>
</ul>


Revenues are still declining by ~teens% YoY but margins shows signs of improvements as end-demand improves and utilization is low. 
Renesas doesn’t have an inventory problem and increasing revenues will lead to higher utilization and higher margins. 
As Renesas is showing signs of a bottom, the stock is very cheap, trading at -2 standard deviations or 11x 2025 EPS, 9x 2026 EPS.


Renesas 1Q25: Cheap Stock That’s Bottoming Out

<ul>
<li>Very poor 1Q25, operating profit close to zero. 2Q a bit better with lower revenue decline, but OP still close to zero.  </li>
<li>Management claims 1Q is the bottom for revenues, its possible, but 2 large risks: restructuring costs and very high inventories.</li>
<li>Consensus expects a slow recovery into 2026, the stock looks cheap at 11x 2026 EPS. However, given the firm’s track record and the risks mentioned, lets wait 1 more quarter.</li>
</ul>


Very poor 1Q25, operating profit close to zero. 2Q a bit better with lower revenue decline, but OP still close to zero.  
Management claims 1Q is the bottom for revenues, its possible, but 2 large risks: restructuring costs and very high inventories.
Consensus expects a slow recovery into 2026, the stock looks cheap at 11x 2026 EPS. However, given the firm’s track record and the risks mentioned, lets wait 1 more quarter.


STMicro: Ugly but Mngt Says 1Q25 Is the Bottom. Restructuring Has to Start, Horrendous Inventories.

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

InnoScience Suzhou Technology / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/innoscience-suzhou-technology" target="_blank" data-smartkarma-citation="entities:44185:1" rel="noopener">InnoScience Suzhou Technology (2577 HK)</a> has priced its IPO at HK$30.86/share, the low end of the range. Over half the shares have been allotted to cornerstone investors.</li>
<li>
<a href="https://www.smartkarma.com/entities/innoscience-suzhou-technology" target="_blank" data-smartkarma-citation="entities:44185:1" rel="noopener">InnoScience Suzhou Technology (2577 HK)</a> should be added to the HSCI in March and will be added to Southbound Stock Connect early March.</li>
<li>Inclusion in global indices will take place in 2026 and there will be supply in mid- and late-2025 following lock-up expiries.</li>
</ul>



InnoScience Suzhou Technology (2577 HK) has priced its IPO at HK$30.86/share, the low end of the range. Over half the shares have been allotted to cornerstone investors.

InnoScience Suzhou Technology (2577 HK) should be added to the HSCI in March and will be added to Southbound Stock Connect early March.
Inclusion in global indices will take place in 2026 and there will be supply in mid- and late-2025 following lock-up expiries.


InnoScience (2577 HK): Prices at Low End & Lists Today; Index Inclusion Timeline

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

SMIC (Semiconductor Manufacturing International Corp) (981 HK)

SMIC (Semiconductor Manufacturing International Corp)

<ul>
<li>Chinese Foundries (HuaHong, SMIC) have outgrown ex-China (GlobalFoundries, UMC, Vanguard) very significantly. Reacting to US sanctions, Chinese Chip Designers have shifted to domestic Foundries. China / ex-China supply-chains have decoupled.</li>
<li>End-Demand diverged up to 2Q24. Chinese Foundries were mentioning end-demand recovering, customers restocking, tight capacity. Ex-China Foundries mentioning the opposite: weak end-demand, customers destocking, low utilization. </li>
<li>Change of direction in 3Q24. Chinese Foundries become cautious, we see an obvious inventory problem on overblown end-demand growth expectations. Ex-China end-demand is stabilizing, destocking coming to an end.</li>
</ul>


Chinese Foundries (HuaHong, SMIC) have outgrown ex-China (GlobalFoundries, UMC, Vanguard) very significantly. Reacting to US sanctions, Chinese Chip Designers have shifted to domestic Foundries. China / ex-China supply-chains have decoupled.
End-Demand diverged up to 2Q24. Chinese Foundries were mentioning end-demand recovering, customers restocking, tight capacity. Ex-China Foundries mentioning the opposite: weak end-demand, customers destocking, low utilization. 
Change of direction in 3Q24. Chinese Foundries become cautious, we see an obvious inventory problem on overblown end-demand growth expectations. Ex-China end-demand is stabilizing, destocking coming to an end.


Foundries. China (Hua Hong, SMIC) Has Outperformed but on Poor Margins & Inventory Risk.

Switzerland

STMicroelectronics is a global leader in the semiconductor industry, specializing in the design, development, manufacturing, and marketing of a wide range of semiconductor products. Its key offerings include microcontrollers, sensors, power management ICs, analog ICs, and MEMS for automotive, industrial, and consumer electronics markets. The company is headquartered in Plan-les-Ouates, Geneva, Switzerland, and was founded in 1987.

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STMicroelectronics (STM US)

Automotive Power SiC: The Bankruptcy of Wolfspeed

The decline in Silicon Carbide wafer price led to bankruptcy of Wolfspeed. Blame placed on Chinese over-capacity but the vertical integration of...

Nicolas Baratte

Renesas 1Q25: Cheap Stock That’s Bottoming Out

Despite declining revenues, Renesas is showing signs of margins improvement due to increased end-demand and low utilization, making the stock a...

Nicolas Baratte

STMicro: Ugly but Mngt Says 1Q25 Is the Bottom. Restructuring Has to Start, Horrendous Inventories.

Poor 1Q25 with close to zero OP, slight improvement in 2Q but risks of restructuring and high inventories. Consensus expects slow recovery, stock...

Nicolas Baratte

InnoScience (2577 HK): Prices at Low End & Lists Today; Index Inclusion Timeline

InnoScience raised US$180m in its IPO, valuing the company at US$3.5bn and the H-shares at US$1.95bn. Float will be 2-4% till Dec25, so no chance...

Brian Freitas

Foundries. China (Hua Hong, SMIC) Has Outperformed but on Poor Margins & Inventory Risk.

Chinese foundries have overgrown ex-China counterparts, but now face inventory issues. Ex-China foundries are stabilizing, destocking coming to an...

Nicolas Baratte

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Automotive Power SiC: The Bankruptcy of Wolfspeed

​The decline in Silicon Carbide wafer price led to bankruptcy of Wolfspeed. Blame placed on Chinese over-capacity but the vertical integration of...

Nicolas Baratte

Renesas 1Q25: Cheap Stock That’s Bottoming Out

​Despite declining revenues, Renesas is showing signs of margins improvement due to increased end-demand and low utilization, making the stock a...

Nicolas Baratte

STMicro: Ugly but Mngt Says 1Q25 Is the Bottom. Restructuring Has to Start, Horrendous Inventories.

​Poor 1Q25 with close to zero OP, slight improvement in 2Q but risks of restructuring and high inventories. Consensus expects slow recovery, stock...

Nicolas Baratte

InnoScience (2577 HK): Prices at Low End & Lists Today; Index Inclusion Timeline

InnoScience raised US$180m in its IPO, valuing the company at US$3.5bn and the H-shares at US$1.95bn. Float will be 2-4% till Dec25, so no chance...

Brian Freitas

Foundries. China (Hua Hong, SMIC) Has Outperformed but on Poor Margins & Inventory Risk.

​Chinese foundries have overgrown ex-China counterparts, but now face inventory issues. Ex-China foundries are stabilizing, destocking coming to an...

Nicolas Baratte

The decline in Silicon Carbide wafer price led to bankruptcy of Wolfspeed. Blame placed on Chinese over-capacity but the vertical integration of...

Despite declining revenues, Renesas is showing signs of margins improvement due to increased end-demand and low utilization, making the stock a...

Poor 1Q25 with close to zero OP, slight improvement in 2Q but risks of restructuring and high inventories. Consensus expects slow recovery, stock...

Chinese foundries have overgrown ex-China counterparts, but now face inventory issues. Ex-China foundries are stabilizing, destocking coming to an...