Technology / Semiconductor / Internet Research

Nicolas Baratte

Equity Bottom-Up

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.

<ul>
<li>If we care about PMI, we have to care about Automotive and Industrial Semiconductor. Cautiousness about high inventories and slowing end-demand slowly emerged in 1H24. 4Q guidance is a firework.</li>
<li>Renesas: 1Q24 “the Q1 bottom has not changed”. 2Q24 “more cautious outlook”. 3Q “we need to step on the brakes more. End demand, more than expected, became weaker”.</li>
<li>Do we buy stocks when valuations are low or when downward revisions are over? These stocks are cheap, but Consensus will continue cutting till 2Q25, in our view.</li>
</ul>


If we care about PMI, we have to care about Automotive and Industrial Semiconductor. Cautiousness about high inventories and slowing end-demand slowly emerged in 1H24. 4Q guidance is a firework.
Renesas: 1Q24 “the Q1 bottom has not changed”. 2Q24 “more cautious outlook”. 3Q “we need to step on the brakes more. End demand, more than expected, became weaker”.
Do we buy stocks when valuations are low or when downward revisions are over? These stocks are cheap, but Consensus will continue cutting till 2Q25, in our view.


NXP, Renesas, STMicro: Only Bad News. Auto & Industrial Semi Firms Give Poor Signals on End-Demand.

<ul>
<li>3Q24 a bit better. 4Q guidance inline. The negative surprise is a 1Q25 double warning: revenue decline worse than normal seasonality and "manufacturing activity will not follow the usual profile”.</li>
<li>The Automotive outlook is very poor: decline in car production, decline in EV, inventories still high, increase in pricing pressure. Industrials still in inventory correction.  </li>
<li>Consensus will obviously revise lower for 1H25. The stock is trading at 12.5x 2025 estimates of yesterday, maybe 14-15x tomorrow's 2025 forecasts. Let's wait for that to happen. </li>
</ul>


3Q24 a bit better. 4Q guidance inline. The negative surprise is a 1Q25 double warning: revenue decline worse than normal seasonality and "manufacturing activity will not follow the usual profile”.
The Automotive outlook is very poor: decline in car production, decline in EV, inventories still high, increase in pricing pressure. Industrials still in inventory correction.  
Consensus will obviously revise lower for 1H25. The stock is trading at 12.5x 2025 estimates of yesterday, maybe 14-15x tomorrow's 2025 forecasts. Let's wait for that to happen. 


STMicro (STM): Can It Get Any Worse? Yes, It Will in 1Q25. Let's Wait for that Reset.

TSMC (Taiwan Semiconductor Manufacturing) / Equity Bottom-Up

TSMC (Taiwan Semiconductor Manufacturing) (2330 TT)

TSMC (Taiwan Semiconductor Manufacturing)

<ul>
<li>The price of ASML EUV machine is increasing as thruput (wafer / hour) is increasing. </li>
<li>TSMC 3nm is fully booked in 2025. Here is the list of clients / chips. </li>
<li>SiC and MCU over-investments in China? Very likely. China is limiting SiC investments. </li>
</ul>


The price of ASML EUV machine is increasing as thruput (wafer / hour) is increasing. 
TSMC 3nm is fully booked in 2025. Here is the list of clients / chips. 
SiC and MCU over-investments in China? Very likely. China is limiting SiC investments. 


Tech News This Week. ASML, TSMC, Intel, SiC Capacity, MCU in China

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

Index Rebalance

<ul>
<li>There are no constituent changes for the <a href="https://www.smartkarma.com/entities/vaneck-vectors-semiconductor" target="_blank" data-smartkarma-citation="entities:32807:1" rel="noopener">VanEck Vectors Semiconductor (SMH US)</a> ETF in March but there are a lot of float and capping changes.</li>
<li>
<a href="https://www.smartkarma.com/entities/taiwan-semiconductor-sp-adr" target="_blank" data-smartkarma-citation="entities:8587:1" rel="noopener">Taiwan Semiconductor (TSMC) - ADR (TSM US)</a> is the largest buy while capping results in <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" data-smartkarma-citation="entities:5891:1" rel="noopener">NVIDIA Corp (NVDA US)</a> being the largest sell by far.</li>
<li>Estimated one-way turnover is 8.3% resulting in a round-trip trade of nearly US$3bn. There are a few stocks with more than 0.2x ADV to trade.</li>
</ul>


There are no constituent changes for the VanEck Vectors Semiconductor (SMH US) ETF in March but there are a lot of float and capping changes.

Taiwan Semiconductor (TSMC) - ADR (TSM US) is the largest buy while capping results in NVIDIA Corp (NVDA US) being the largest sell by far.
Estimated one-way turnover is 8.3% resulting in a round-trip trade of nearly US$3bn. There are a few stocks with more than 0.2x ADV to trade.


MV US Listed Semiconductor 25 Index Rebalance: Over US$1bn to Sell in NVIDIA

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)

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

NXP, Renesas, STMicro: Only Bad News. Auto & Industrial Semi Firms Give Poor Signals on End-Demand.

Cautious outlook for Auto and Industrial Semiconductor due to high inventories and slowing end-demand. NXP, Renesas and STMicro stocks look cheap...

Nicolas Baratte

STMicro (STM): Can It Get Any Worse? Yes, It Will in 1Q25. Let's Wait for that Reset.

Negative 1Q25 double warning for company, with poor automotive outlook and consensus likely to revise lower for 1H25. Stock trading at 12.5x 2025...

Nicolas Baratte

Tech News This Week. ASML, TSMC, Intel, SiC Capacity, MCU in China

ASML price increase in 2025. TSMC 3nm Order Surge Expected in 2025. Intel's Next-Gen Panther Lake CPUs Handed to Lenovo. China restrictions on SiC...

Nicolas Baratte

MV US Listed Semiconductor 25 Index Rebalance: Over US$1bn to Sell in NVIDIA

TSMC is the largest buy and NVIDIA is the largest sell at the SMH rebalance in March. Estimated one-way turnover is 8.3% resulting in a round-trip...

Brian Freitas

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Market Cap (USDm)

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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

NXP, Renesas, STMicro: Only Bad News. Auto & Industrial Semi Firms Give Poor Signals on End-Demand.

​Cautious outlook for Auto and Industrial Semiconductor due to high inventories and slowing end-demand. NXP, Renesas and STMicro stocks look cheap...

Nicolas Baratte

STMicro (STM): Can It Get Any Worse? Yes, It Will in 1Q25. Let's Wait for that Reset.

​Negative 1Q25 double warning for company, with poor automotive outlook and consensus likely to revise lower for 1H25. Stock trading at 12.5x 2025...

Nicolas Baratte

Tech News This Week. ASML, TSMC, Intel, SiC Capacity, MCU in China

ASML price increase in 2025. TSMC 3nm Order Surge Expected in 2025. Intel's Next-Gen Panther Lake CPUs Handed to Lenovo. China restrictions on SiC...

Nicolas Baratte

MV US Listed Semiconductor 25 Index Rebalance: Over US$1bn to Sell in NVIDIA

TSMC is the largest buy and NVIDIA is the largest sell at the SMH rebalance in March. Estimated one-way turnover is 8.3% resulting in a round-trip...

Brian Freitas

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

Cautious outlook for Auto and Industrial Semiconductor due to high inventories and slowing end-demand. NXP, Renesas and STMicro stocks look cheap...

Negative 1Q25 double warning for company, with poor automotive outlook and consensus likely to revise lower for 1H25. Stock trading at 12.5x 2025...