Tech Hardware and Semiconductor

1. From Nvidia Results to See Supply Chain Stories?

By Andrew Lu

• Post 35% price gain in a quarter, many good news we expected and other analysts expected already factored into the share price. We believe the risk/reward not attractive here.
• TSMC guides stronger 1Q24 and 2024, helped by Nvidia and copy cat AI GPU/ASIC orders. We see greater opportunities for alternative copy cat solutions like AMD and Alchip.
• We attribute Nvidia customers’ sales discrepancy to AI server is cannibalizing non-AI server and Nvidia is allocating more GPUs to premium price paying customers in 1H24 and reverse in 2H24.

2. TSMC (2330.TT; TSM.US): The Implications of Feb Sales, TSMC 2nd Japanese Fab and NVDA Stock Price.

By Patrick Liao

• Usually, February is typically the month with the fewest working days of the year, and therefore, revenue is likely to be at its lowest as well.
• We consider that the Taiwanese government may desire TSMC to build fabs in countries aligned with those who signed the “Wassenaar Arrangement.” 
• The price hike of NVIDIA Corp (NVDA US) by US$785.38 on February 22 in the US market could signal an important development in the AI sector.

3. United Microelectronics Is Becoming a Great Long-Term Acquisition Target for Intel

By Vincent Fernando, CFA, Zero One

• UMC spoke at an investment bank’s recent conference, providing additional color on guidance and its collaboration with Intel for 12nm chip production.
• UMC comments imply the key synergies between the two companies, whereby each can solve the other’s key problem,
• While UMC most likely needs to remain a “Taiwanese company” in terms of optics given its history, Intel’s synergies with UMC establishes acquisition-value support for UMC shares in our view.

4. AMAT. Post Earnings Surge For No Good Reason

By William Keating, Ingenuity

• Q124 revenues of $6.71 billion, at the high end of the guided range and essentially flat sequentially both QoQ and YoY
• Q224 revenue $6.5 billion at the midpoint, a modest downward movement of 3% QoQ and in line with what we saw from peers KLAC and LRCX
• Still a great company with excellent growth prospects, just not in 2024

5. SUMCO’s Sobering Outlook For Silicon Wafers

By William Keating, Ingenuity

• Q423 revenues of ¥105.1 billion, about 5% better than forecasted, up 5% QoQ but down ~10% YoY.
• Q124 revenues forecasted to decline 17% QoQ to ¥87 billion. Not surprisingly, EBITDA will also decline 33% QoQ to ¥22.1 billion.
• On a brighter note, demand growth driven by generative AI will roughly double wafer demand for servers (AI+General) by 2027

6. Intel Snags Altman To Close Foundry Day Event

By William Keating, Ingenuity

• Despite the high-profile announcement of his attendance, his segment was less than 3 minutes long!
• Intel’s CEO alluded to a partnership with OpenAI and implied there’s more to come yet there’s been no public announcement of any such partnership. 
• Microsoft’s commitment to use Intel’s 18A is a vote of confidence in their foundry offering. Let’s see how it plays out.

7. Finding the Sweet Spot: Nvidia’s Goldilocks Quarter

By Douglas O’Laughlin, Fabricated Knowledge

• Nvidia’s earnings are akin to my Super Bowl.
• There is no more significant event in semiconductors and AI, and each quarter, we tune into Nvidia’s results to see precisely what quarter we are in the AI hype cycle (and potentially bubble).
• There is no better signpost for the entire AI ecosystem than the company making the most of the revenue so far: Nvidia.

8. Novatek (3034.TT): It’s Said to Alliance with ARM to Build up Neoverse V2, Targeting AI Market.

By Patrick Liao

• Novatek’s share price has surged by more than 15% in four days due to the news of Novatek’s alliance with ARM to develop Neoverse V2.
• While the decision on whether the iPhone 16 will feature OLED technology is still pending, the general sentiment is optimistic.
• Novatek is set to leverage Intel Corp (INTC US)’s 12nm capacity through United Microelectron Sp Adr (UMC US) in the near future.

9. Taiwan Tech Weekly: AI Plays Weak Ahead of Nvidia Results Today; Intel & UMC; ARM & Novatek

By Vincent Fernando, CFA, Zero One

• Key Events: 1) Nvidia Results Coming Today in the U.S. 2) Elan & ChipMOS Tomorrow in Taiwan 3) U.S. PC Maker Results Next Week
• Why United Microelectronics Is Becoming a Great Long-Term Acquisition Target for Intel 
• Novatek a Top Gainer After Reports of Alliance with ARM to Build Neoverse V2 for AI

10. Globalwafers (6488.TT): The Revenue Is Expected to Improve in 2H24F

By Patrick Liao

• The sales of Jan 2024F were the lowest during 2022-2024F, indicating a likely downtrend for 1Q24F.
• Demand is expected to remain sluggish in 2Q24F, potentially resulting in decreased raw wafer demand for Logic and Memory in 2Q24F.
• The market for 12″ raw wafers is expected to have a more stable demand-supply balance, while raw wafers of 8” and smaller sizes could experience reduced demand in 1H24F.

1. Taiwan Dual-Listings Monitor: High Spreads Persist After CNY Break

By Vincent Fernando, CFA, Zero One

• TSMC: +16.6% ADR Premium, Still High After CNY Multi-Day Taiwan Market Close
• UMC: 1.3% ADR Premium, Still Historically High After CNY Break
• ChipMOS: +4.2% Premium, Very Rare & High Level, Not Sustainable

2. Taiwan Tech Weekly: TSMC Playing Post-CNY Catch-Up; All Eyes on Upcoming Nvidia Results

By Vincent Fernando, CFA, Zero One

• Taiwan Market Surges in Post-CNY Catch-Up, TSMC a Top Gainer Locally
• Key Events Ahead: Nvidia Results Next Week, Key Taiwan Names Reporting
• Taiwan Dual-Listings Monitor: High Spreads to Persist After CNY Break 

3. Silicon Motion Memory Readthrough: NAND Flash to Remain In Shortage; Up-Cycle to Persist

By Vincent Fernando, CFA, Zero One

• Silicon Motion reported results last week that beat consensus; Moreover, the company expects strong growth not just in 2024E, but also in 2025E.
• The company’s growth will significantly exceed PC and mobile phone market growth thanks to strong memory demand trends within these segments.
• The company sees NAND Flash in shortage into 2025E based on visibility into its client ecosystem. We continue to view SIMO as a next-wave play on the Memory recovery.

4. Globalfoundries. Pressure Grows As Customer Penalties Soar

By William Keating, Ingenuity

• Globalfoundries (GFS) reported Q423 revenues of $1.854 billion, marginally above the midpoint of the guidance range, down 12% YoY and essentially flat sequentially.
• Guided Q124 down 18% QoQ with Gross Margin set to fall from 29% to 23%
• SMIC will outspend GFS 10x in CapEx terms this year

5. Renesas (6723 JP): Two More Strategic Acquisitions

By Scott Foster, LightStream Research

• Renesas has acquired PCB electronic design company Altium and Gallium Nitride power device maker Transphorm. Its tender offer for Sequans Communications has been extended.
• These are positive developments in our view, but sales and profit margins were down in 4Q of FY Dec-23 and are expected to decline this quarter as well.
• On the other hand, inventory adjustment is proceeding and the share price has dropped 12.6% since last Tuesday. Buy on weakness for the longer term. 

6. Automotive (NXPI, IFX) Optics (FN, COHR), MKSI, MPWR, ACLS, SLAB, RMBS, ARM

By Douglas O’Laughlin, Fabricated Knowledge

• Welcome to this week’s earnings. My spark notes are the NXPI and IFX did better than I feared, but I continue to be unconstructive on automotive.

• Fabrinet and Coherent both achieved good results, but Fabrinet disappointed expectations for Nvidia’s pluggable revenue. Is this a weak read-through? Unlikely. Marvell should have an amazing year if Coherent’s TAM is remotely correct.

• MKSI put up the exact results I was looking for, and this continues to be my favorite idea. As WFE increases, inventory builds will happen, and then financial and operational leverage will take care of the rest.

7. WTF Is Going on at SuperMicro? (SMCI)

By Douglas O’Laughlin, Fabricated Knowledge

• I want to talk about Supermicro. The stock has gone parabolic; some say it’s emblematic of the coming Semiconductor and AI bubble.
• I think it is to a certain extent, but I want to point out a particular aspect that has been happening.
• Given the high volume of options expiring today, I believe there is an ongoing gamma squeeze. It created huge buying pressure that has led to today. This was the run-up until Thursday.

1. Taiwan Tech Weekly: TSMC Sales Ahead; Display Driver Growth Reversal; AI Names Keep Flying

By Vincent Fernando, CFA, Zero One

• Latest Performance: Taiwan AI Names Keep Flying; ASE & Mediatek Lose Steam After Reporting
• Largest Display Driver Maker in the World’s Guidance Implies Growth Reversal Coming in Feb & March
• TSMC and Samsung Will Keep Their Most Advanced Chipmaking at Home

2. Intel’s UMC Partnership Is A Big Deal. For UMC.

By William Keating, Ingenuity

• UMC’s Q423 results in line with expectations. Q124 guidance, down 2-3% QoQ, demonstrates ongoing headwinds for foundry
• Intel, UMC foundry partnership helps the latter overcome their 14nm issues while giving them bargain basement access to US manufacturing capacity 
• If Intel could have developed and deployed the proposed 12nm specialty process on their own, they would have….

3. SMIC (981.HK): The GM Reaches a New Low of 9-11% in 1Q24F, Despite Revenue Growing by 2% QoQ.

By Patrick Liao

• The 1Q24F outlook is still showing a decline, with a slightly increase in revenue of 2% QoQ. However, the GM is expected to decrease to 9-11% from 16.4% in 4Q23.
• Management predicts that there will be a double U-shaped recovery in 2024F. Revenue in 2024F is expected to grow annually by mid-single-digit.
• The main areas of growth for SMIC in 2024F will be in mobile phones, smart homes, IoT, and computing.

4. China Semi Foundry: Fierce Competition & Sluggish Rebound In Year Of The Dragon

By William Keating, Ingenuity

• Both SMIC & Hua Hong reported Q423 earnings in line with expectations and both guided Q124 flat to slightly down. SMIC expects FY24 mid single digit growth YoY.
• The downturn has exposed inherent weakness in China’s Semi Foundry segment relative to peers as exemplified by the significant GM disparity
• China’s two leading semi foundries have ~80% domestic dependence. Right now, that’s a headwind

5. Largest Display Driver Maker in the World’s Guidance Implies Growth Reversal Coming in Feb & March

By Vincent Fernando, CFA, Zero One

• Novatek reported over 20% YoY growth for 4Q23 and slightly beat expectations but the latest guidance implies growth to reverse to a sales contraction in the latter part of 1Q24E.
• Gross and operating margins are guided to contract; nevertheless, inventory dropped to one of the lowest levels since COVID and is expected to remain healthy.
• Novatek’s latest results appear to signal that while inventory levels are healthy, the demand growth rebound for display drivers that started in June 2023E could lose steam in 1Q24E.

6. MonotaRO (3064 JP): Slowdown in the Price

By Scott Foster, LightStream Research

• Annual sales growth has dropped from 20% or more in recent years to 12.5% in FY Dec-23. The operating margin ticked up last year, but is basically trending sideways.
• The share price has dropped by 35% since April 2023, bringing the projected P/E ratio down to the bottom of its 10-year range. Buy back in for the long term. 
• Guidance, which is usually accurate, is for 12.7% sales growth this year and an operating margin of 12.5%. Growth should continue in future years with flat or better margins.

7. KLA & LaserTec, AMD, Hyperscaler Capex, SK Hynix, SWKS and QRVO, WOLF, MCHP

By Douglas O’Laughlin, Fabricated Knowledge

• KLA had a rare miss. The guidance was a bit light for the inspection execution machine.
• KLA rarely misses and is by far the best financially managed of the large-cap semicap companies.
• KLA reports Q2 EPS $6.16 ex-items vs FactSet $5.91

8. Novatek (3034.TT): It’s the Low Season in 1Q24F; AI Is Gradually Added to Different Applications.

By Patrick Liao

• 4Q23 surpassed the guidance for revenue, GM, and OPM. 4Q23 EPS reached NT$8.76, compared to NT$10.46 in 3Q23 and NT$6.64 in 4Q22.
• 1Q24F is typically the traditional low season for consumer electronics, and there are fewer working days during the Lunar New Year.
• It is expected that the dividend payout ratio this year will be similar to previous years, which has been higher than 80% in the past few years.

9. Himax: Industry Readthrough for Automotives, Notebooks, and Edge AI Applications

By Vincent Fernando, CFA, Zero One

• Readthrough: Automotive Applications End-Demand — China Market Soft But Touch and Dimming Technology is Expanding
• Readthrough: Panel Makers Constraining Supply in 1Q24 to Protect Pricing
• Readthrough: Customers Are Restocking Notebooks in 1Q24E, PC Replacement Cycle is Coming

1. AMD. This Party’s Just Getting Started…

By William Keating, Ingenuity

• Q423 revenues of $6.2 billion, $100 million above the guided midpoint, up 6% QoQ and up 10% YoY
• Q124 guidance was for $5.4 billion at the midpoint, down 13% QoQ and flat YoY.
• We forecast 2024 Data Center growth of >70% YoY with potential for further upside

2. TSMC, SMCI, Texas Instruments, AWE, ASML, and LRCX

By Douglas O’Laughlin, Fabricated Knowledge

• TSMC started this season’s earnings with a strong result. Shares rallied immensely on this print, and it’s justified. In almost every metric, TSMC came out ahead.

• TSMC had a revenue, operating income, and gross margin beat and guided above the street.

• Now let’s break out revenue by node and platform for a further look into the results of the world’s largest foundry.

3. Intel 18A is in Sight, Does it Matter?

By Douglas O’Laughlin, Fabricated Knowledge

• Intel reported earnings last week. Intel was one of my favorite stocks last year, and I wrote about it here in “Is This the Intel Inflection”, where I successfully called the bottom in the stock.
• It’s worked pretty well, even against the SOXX index since then.
• I’ll summarize my thesis back then, update you now on what I think about Intel, and write about results and read-throughs.

4. Samsung Memory Revenues Up Impressively

By Jim Handy, Objective Analysis

• Samsung’s earnings was recently reported, with memory revenues up nearly 50% in the fourth quarter
• This gain has been driven by very strong growth in AI and a normalization of inventory levels
• The memory business is approaching positive margins once again, and SK hynix is already profitable

5. LRCX. Recovery Stalls As Outlook Remains Stubbornly Muted

By William Keating, Ingenuity

• LRCX reported Q423 revenues of $3.76 billion, marginally ahead of the guided midpoint, up 8% QoQ but down 29% YoY
• Looking ahead, LRCX forecasted Q124 revenues of $3.7 billion, essentially flat sequentially.
• The memory recovery is happening, but only for HBM and node transitions. No spending on memory capacity additions means limited upside for LRCX. 

6. Taiwan Dual-Listings Monitor: Can TSMC Sustain Extreme ADR Spread?; UMC Results Catalyst Tomorrow

By Vincent Fernando, CFA, Zero One

• TSMC: +13.5% ADR Premium, Historically High Spread Represents Short Opportunity
• UMC: -0.9% ADR Discount, Results Tomorrow Could Open Up Trade Opportunity
• ASE: +9.1% Premium, Historically High But Likely Best to Wait for Higher Levels

7. Taiwan Tech Weekly: Semiconductors Surging in Southeast Asia; UMC & Mediatek Results Today

By Vincent Fernando, CFA, Zero One

• UMC & Mediatek Results Today in Taiwan, Samsung Also Reporting; Taiwan AI Names Flying; Himax & Novatek Top Losers Ahead of Results.
• Semiconductor Surge: Southeast Asia Taking Center Stage Amid Taiwan’s Geopolitical Shift
• First Run of Tech/Semis’ Guidance Tells Us What Industries and Companies to Avoid

8. MediaTek (2454.TT): 2024F Indicating a Complete Recovery from the Previous Downturn Situation.

By Patrick Liao

• MediaTek expects a reduced DOI level in 2024F while maintaining operating expenses and pricing discipline in 2023.
• The upgrade cycle has begun for devices equipped with AI functions. The Dimensity 9300 is just the first edge AI product for smartphones. 
• MediaTek does not predict a significant increase in demand and expects a steady demand for smartphones. 

9. KLAC. Looks a Lot Like LRCX!

By William Keating, Ingenuity

• Q423 revenues of $2.49 billion, marginally above the guided midpoint, up 3.6% QoQ but down 15.6% YoY. Net income was $583 million, down $158 million QoQ.
• Current quarter guidance of $2.3 billion, down 8% QoQ and also down around 5% YoY
• Interesting Q&A discussion on backlog. KLAC’s order book is risker than their peers due to their shorter lead times. Something to watch…

10. Mediatek Results Take-Aways: High-End Devices to Take Market Share Globally; Upward Revisions Likely

By Vincent Fernando, CFA, Zero One

• Mediatek’s results for 4Q23 exceeded expectations; Forward guidance also suggests that consensus forecasts for 2024 may need to be revised upward.
• Foresees the start of its “next growth phase” in 2024, with AI influencing mobile upgrades and the introduction of new products in late 2025, indicating potential growth through 2026E.
• Mediatek indicated that AI interest will drive high-end mobile devices to gain market share in 2024E.

1. Memory Monitor: Microsoft Copilot Will Supercharge Demand for DRAM; SK Hynix, Nanya Tech, Micron

By Vincent Fernando, CFA, Zero One

• MSFT’s new AI features for Windows will need computers with at least 16GB of DRAM to run effectively. MSFT is asking manufacturers for this as a minimum for AI models.
• MSFT announced Copilot Pro for individuals and small businesses last week. The desire to use generative AI and the minimum required DRAM will drive accelerated PC upgrades.
• We note relative strength in 16GB DRAM prices; In Memory space, we continue to see relative value in SK Hynix, however, Nanya has the opportunity to Outperform in Taiwan.

2. Good Entry Point as Tesla Stabilizes Its 4Q23 Asp and Profits Per EV

By Andrew Lu

• Blended ASP of decline of 1% q/q in the past two quarters in 2H23, better than 3-10% q/q decline during 3Q22-2Q23, resulting in Tesla’s blended ASP decline to decelerate.
• Due to Tesla’s cost cutting efforts with nice inventory control, we calculates profits/EV rebounded nicely by 21% q/q to US$3,490 per EV in 4Q23, much nicer than no profits.
• Good improvement on its FSD Beta version 12.1.2 lately might become a pure profits/EV boost by incremental subscription of US$10,000-15,000 per EV or monthly fee by existing Tesla owners.

3. ASML Guides Q124 Down 27% QoQ, Shares Surge >8%. What Gives?

By William Keating, Ingenuity

• ASML reported Q423 revenues of €7.2 billion, up 7.5% QoQ and ~€100 million above the guided midpoint for the quarter.
• ASML guided Q124 at €5.25 billion, down a very significant 27% sequentially. Also reiterated their previous forecast for 2024 revenues to be remain flat with 2023
• ASML shares surged >8% in overnight trading. What’s going on here?

4. Are You Confused About What Intel and UMC Are Working Together?

By Andrew Lu

• What production fabs and capacity? Intel’s Arizona 10nm Fab 12, 22, 32, which are mostly depreciated. Intel will provide nearly 30k/m 12″ capacity for UMC at the first stage.
• Who’s 12nm node and design rule? UMC’s tsmc-like 12nm design rule for customers to produce WiFi 7, TV controller, and other products.
• Other discussions include: “Who will operate the fabs?”, “How to share sales/profits?”, “Mass production time?”, “Why benefits to Intel?”, “Why benefits to UMC?”, “Will TSMC get hurt?”

5. What SK Hynix’s Latest Results Indicate for PC & Mobile Makers into 2025E, Including Apple

By Vincent Fernando, CFA, Zero One

• SK Hynix results surpised consensus with a swing to positive operating profit; The company expects industry demand growth to exceed supply growth by a wide margin in 2024E.
• Management suggests optimism not just for 2024E, but also for 2025E. 2025E is when a much larger positive demand impact from AI is expected as AI products will expand substantially.
• SK Hynix comments regarding AI phones imply that consumers will most likely need to upgrade their phones, including iPhones, to take full advantage of AI capabilities

6. A R&D Director Dr. Young Was at TSMC, SMIC, and Intel Foundry Shared Views on 3-1nm Competitions

By Andrew Lu

• With a strong 20A/18A team, Intel might take some CPU shares back from AMD to affect TSMC but reduce geopolitical tensions from the US after Intel returning to the best.
• SMIC can use DUV to do 3nm but different from others’ because Moore’s law is no longer using circuit line width but to use performance, power, density to determine 3nm.
• New fabless industry opportunities are emerging in middle east countries, and south east Asia countries like Vietnam. Despite high cost issues, global expansion will help TSMC to attract global talents.

7. First Run of Tech/Semis’ Guidance Tells Us What Industries and Companies to Avoid

By Andrew Lu

• Continuous weaknesses to be seen in industrial and general non-AI server semi demand starting 3Q23 and lasting into 1Q24 and some weaknesses in digital consumer semi demand starting 4Q23.
• Memory semiconductor vendors see strengths in 4Q23 and continuous improvement in DRAM/NAND price in 1Q24.
• We see a healthy mid single digit q/q and y/y decline on 4Q23 MOI but suggest vendors to avoid in next 1-2 months before they guide down the market.

8. From Dec N.A. SEMI Equipment Billings to Expect a Sales Raise for Applied Materials and Lam Research

By Andrew Lu

• Applied guided -1% q/q and Lam Research guided 8% q/q sales growth, below N.A. front end semi equipment billings’ 12% q/q growth, room for analysts to raise their 4Q23E sales.
• N.A. front end equipment sales reached US$3.775bn, up 1% m/m, down 5% y/y but back end equipment billings reached US$222mn in December, down 8% m/m and down 9% y/y.
• Better than equipment vendors, WSTS/SIA reported November sales of US$48bn, up 3% m/m and up 5% y/y (the first month to turn positive after 14 months of consecutive y/y decline)

9. Intel Ruins The Rally With Its Gloomy Guide

By William Keating, Ingenuity

• Q423 revenues of $15.4 billion, +8.5% QoQ, +10% YoY and $300 million above the guided midpoint
• Q124 guided to $12.7 billion, -17.5% QoQ albeit still up 8% YoY.  
• Intel’s share priced fell 12% on the guide. CEO says this was an overreaction. 

10. Taiwan Tech Weekly: SK Hynix Boosts Optimism for Memory; Intel, Mediatek, Microsoft, UMC Key Events

By Vincent Fernando, CFA, Zero One

• Taiwan Tech Plays Have Soared Since TSMC’s Strong Outlook, and SK Hynix Reported a Return to Op Profit
• Memory Monitor: Microsoft Copilot Will Supercharge Demand for DRAM; SK Hynix, Nanya Tech, Micron
• Key Upcoming Events — Intel, Microsoft, Mediatek, UMC Results Ahead

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

By Andrew Lu

• 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.

2. TSMC Results Make Buy Story Even More Clear; Strong 2024E Guidance & Reiterates Multi-Year Growth

By Vincent Fernando, CFA, Zero One

• TSMC reported 4Q23 results at the upper end of its guidance. More importantly, the company guided for low/mid 20% 2024E sales growth and reiterated an expected 15-20% multi-year CAGR.
• The company provided optimistic guidance for the overall semiconductor industry, forecasting 10% growth in 2024E. TSMC expects to grow much faster than the industry, however.
• TSMC is one of our Structural Longs; our NT$760 target implies 29% upside. The latest results make TSMC’s Buy case even more clear, in our view.

3. TSMC. Roaring Into Year Of The Dragon

By William Keating, Ingenuity

• Q423 revenues of $19.62 billion, at the high end of guidance, up 13.8% QoQ and down 1.5% YoY. Net profit margin of 38.2% results in net income of ~$7.5 billion.
• FY23 revenues of $69.3 billion, down 8.7% YoY, only the second such down year since 2005
• Bullish FY24 forecast for >20% YoY growth sends share price soaring in overnight trading. 

4. Taiwan Tech Weekly: TSMC Results; AI PC Market Site Visit; Alchip GDR Offering

By Vincent Fernando, CFA, Zero One

• TSMC Results Tomorrow, Interest Will Be Elevated After Taiwan’s Election Result
• AI PC Availability Tight in Taipei? We Visited Taipei’s Guanghua Consumer Electronics Market Over the Weekend
• Alchip Technologies GDR Offering – Has Been Riding on an Unwavering Momentum Over the Past Year 

5. AI Industry Structure and Business Model: What Inning is It?

By Douglas O’Laughlin, Fabricated Knowledge

• What inning is AI in?
• If history is a guide, it’s hard to predict the twists and turns of a new market growing from nothing.
• Here’s my humble attempt at estimating AI penetration and my thoughts on the run-rate business of AI models and industry structure.

6. GlobalWafers (6488.TT): 1Q24F Outlook Could Be a Bit Downside, but 2Q24F Could Be Picking Upward.

By Patrick Liao

• The Globalwafers (6488 TT) outlook for 1Q24F is likely to show a slightly negative QoQ revenue trend. However, we anticipate a positive direction from 2Q24F onwards.  
• We have a relatively high conviction for 2024F compared to 2023, indicating upside potential for the Memory and Logic sectors.
• The supply of 12″ raw wafers remains constrained among the top market players, and overcoming this constraint won’t be easy.  

7. Taiwan Dual-Listings Monitor: TSMC ADRs Outpace Local, Extreme Spread; ChipMOS Good Long Level

By Vincent Fernando, CFA, Zero One

• TSMC: Stock Prices Soared After Reporting Earnings, But ADR Rose Higher… Now +12.4% Premium, Shortable Level
• ASE: ADR Spread Has Rebounded Substantially, Now +8.6%. Not Yet at Short Levels.
• ChipMOS: ADR Spread Drops to -2.2%, Good Level to Go Long.

8. TSMC (2330.TT; TSM.US): Expect Utilization Rate to Rise with Business Recovery.

By Patrick Liao

• The revenue/ GM/ OPM/ EPS is USD$19.62bn/ 53%/ 41.6%/ NT$9.21 in 4Q23. The revenue/ GMO/ OPM is US$18-18.8bn/ 52-54%/ 40-42% in 1Q24F guidance.
• TSMC’s sales for 2024F are expected to grow in the low to mid-twenties YoY.
• 2024F is expected to be a relatively healthy year for the high-performance computing (HPC) and artificial intelligence (AI) sectors, with robust demand.

9. Novatek (3034.TT): Reserved IPhone 16 DDIC for 3Q24F Shipment; 1Q24F Outlook Bright.

By Patrick Liao

• Novatek Microelectronics Corp (3034 TT) had reserved Apple (AAPL US) iPhone 16 Display Driver IC (DDIC) for future shipment since 3Q24F when qualification past.
• Novatek’s outlook is increasing to about 1~5% in 1Q24F, remarked a higher quarter demand than 4Q23.
• It could be a low season in 2Q24F because the rush order shown up around Chinese New Year.  

10. 2023 PC Unit Shipments Disappoint While Smartphone Fared Better Than Expected

By William Keating, Ingenuity

• For 2023, Smartphone unit shipments amounted to 1.17 billion units,  a 3.2% YoY decline, far better than we expected at the beginning of last year.
• For 2023, PC unit shipments amounted to 241.8 million units, a 14.8% YoY decline, worse than expected. Last time annual shipments fell below 250 million units was in 2006.
• The weaker than anticipated PC TAM is a headwind for Intel heading into earnings and Q124 guidance on January 25

1. Taiwan Dual-Listings Monitor: TSMC Contraction Continues; ASE & Chunghwa at Historically Rare Levels

By Vincent Fernando, CFA, Zero One

• TSMC: 7.7% Premium — Spread Has Fallen Further, Likely Can Short a Bit Further
• ASE: Drops to 5.1% Premium — Can Consider Going Long at Current Level Due to Maxed Headroom & ASE’s Strong Advanced Chip Packaging Story
• CHT: Trading at -0.9% Discount — Good Level to Long the Spread, Rare Discount

2. Fujitsu (6702 JP): Horizon Scandal Blows Up

By Scott Foster, LightStream Research

• The UK Post Office “Horizon Scandal” has blown up, putting Fujitsu’s computer system failure on the front pages and on the agenda of Parliament and Prime Minister Sunak.
• Fujitsu UK has been awarded £6.8bn in public contracts since 2012. The Justice Secretary is  now talking about compensation for the enormous financial and personal damage caused.
• Fujitsu’s share price is coming off a new all-time high reached in December. The amount of compensation and loss of potential future contracts is substantial but uncertain.

3. Semiconductor Events Deserving Your Attention @9/1/2024

By William Keating, Ingenuity

• Nanya 12/23 revenues NT$ 3,162 million, +10% MoM, +31.73% YoY. UMC 12/23 revenues NT$ 16,979,226. -9.6% MoM, -18.9%  YoY. Samsung Q423 Sales Flat,  Op Profit +16% QoQ
• Quintaurius, a RISC-V collaboration between Bosch, Infineon, Nordic, NXP & Qualcomm, launched in Germany
• Intel takes delivery of the first ASML High-NA EUV tool. It’s a great photo opportunity but that’s about as far as it goes

4. Stories Behind the Reported Dec/4Q23 Taiwan Semi/Tech Sales

By Andrew Lu

• Y/Y improvement for LCD panel, 8″/12″ raw wafer, CMOS sensor, GaAs RF, cooling system, design service, and semi equipment and material vendors but y/y deterioration for PC/server and gaming vendors. 
• After 9 vendors beating consensus, we might see smartphone IC and RF, semi equipment OEM, and design service vendors in US to report a better than expected 4Q23 sales/earnings.    
• After 6 vendors missing consensus, we might see PC/general server IC and niche memory vendors in US to report a worse than expected 4Q23 sales and earnings.

5. TSMC Finishes 2023 With A Flourish

By William Keating, Ingenuity

• Q423 revenues amounted to NT$625,529. In US$ terms, using TSMC’s projected exchange rate of 32, this translates to  $19.55 billion, a ~13% increase QoQ, and a 2% decrease YoY.
• FY 2023 revenues amounted to NT$2,161.74 billion, down 4.5% YoY. In US$ terms, this amounted to $69.1 billion, an 8.8% decrease YoY and the first such YoY decrease since 2009
• While we foresee Q124 revenues being down 5-10% QoQ, we expect full year 2024 revenues to grow in the range of 5-10% YoY. 

6. Mobileye Guides Down; Automotive Inventory, Memory Strength, and Marvell

By Douglas O’Laughlin, Fabricated Knowledge

• Mobileye surprised markets with an extensive guide down to their results.
• Shares reacted poorly, but at first blush, it makes sense given the magnitude of the guide.  Let’s walk through the release.
• It starts with inventory, and it’s clear their customers have too much inventory.

7. Taiwan Tech Weekly: Dell Outperforms Taiwan PC Names; TSMC Results Coming After Taiwan Election

By Vincent Fernando, CFA, Zero One

• Taiwan PC names have been the top losers over the recent period, after having previously been the top winners. Our Long Dell vs. Short Acer trade is doing well.
• Nanya Tech was a top loser, falling along with its international Memory peers. Nevertheless, we note it underperformed Micron and SK Hynix. We continue to prefer SK Hynix for Memory.
• CES is happening now and will be wrapping up Friday. We like our Dell vs. Taiwan PC names through the CES event. TSMC will be reporting results January 18th.

8. Rohm (6963 JP): Quantum Process Optimization

By Scott Foster, LightStream Research

• Use of quantum technology expected to improve electrical die sorting (EDS) performance by several percentage points.
• Collaboration with Quanmatic aims at full-scale introduction in April, the first month of FY Mar-25. 
• Buy for long-term growth led by power semiconductors with margin expansion from efficiency gains.

9. Apple Partner Hon Hai Reports Weakest December Revenue In Years, But EV Growing; Buying Opportunity

By Vincent Fernando, CFA, Zero One

• Hon Hai released its December revenue figures on January 5th; Revenue came in lower than any other December in recent history.
• Hon Hai’s MIH EV consortium is showcasing solutions at CES 2024 this week in Las Vegas.  In Taiwan, the Luxgen expects 9,000 customer deliveries for its ‘n7’ EV by June.
• Hon Hai is trading at less than 5x forward 2025E PE; and on a trailing basis one of the lower EV/EBITDA’s in history. Latest share drop is a buying opportunity.

10. Ferrotec (6890 JP): Return to Growth Led by Power Semiconductor Substrates

By Scott Foster, LightStream Research

• Ferrotec shares have dropped by a third since last July and are now selling at 8.2x EPS guidance and 0.6x book value.
• Sales and operating should start to recover in 2H of FY Mar-24, led by power semiconductor substrates.
• Buy for the upturn in the semiconductor cycle and capacity expansion in Japan, China and Malaysia. No significant damage from the Noto Peninsula earthquake has been reported.

1. Micron Makes Surprise Settlement With Fujian Jinhua. But Why?

By William Keating, Ingenuity

• After a trial that dragged on for close to five years, the US DoJ case against Fujian Jinhua heard closing arguments in September 2023
• Co-Defendant UMC already settled with Micron over two years ago. The two companies have since gone on to further expand their business relationship 
• The surprise settlement with Fujian Jinhua may help smooth the path for Micron’s troubled operations in China

2. Semiconductor Outlook 2024: AI’s Adolescence

By Douglas O’Laughlin, Fabricated Knowledge

• 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.

3. Ushio (6925 JP): Tie-Up with Applied Materials Adds to Long-Term Potential

By Scott Foster, LightStream Research

• Ushio has tied up with Applied Materials (AMAT) to develop lithography systems for package substrates using AMAT’s Digital Lithography Technology.
• This should keep the focus on Ushio’s more advanced technologies (which also include EUV mask inspection light sources) and its potential to rebound with the semiconductor cycle.
• The shares have dropped back 10% since mid-December, providing an entry point. 3Q results are scheduled to be announced on February 9.

4. Misumi Group (9962 JP): Heads up for 3Q Results in Late January

By Scott Foster, LightStream Research

• The gradual upward trend in monthly sales, which has continued through November, has further to go in our estimation. 
• At 22x EPS guidance for FY Mar-24, the shares are at the low end of their 5-year P/E range.
• Guidance remains unchanged. 3Q results are due to be announced at the end of January

5. UMC (2303.TT; UMC.US): 1Q24F Outlook, the Wafer Demand of MediaTek and Samsung.

By Patrick Liao

• The wafer demand outlook for 1Q24F should be around flat, but ASP (Average Selling Price) is expected to decline by negative mid-single digits.
• Compared to 4Q23, Mediatek Inc (2454 TT)‘s foundry demand is larger and Samsung Electronics (005930 KS)‘s foundry demand is downsized in 1Q24F. 
• United Microelectronics Corp (2303 TT) and Intel Corp (INTC US) are currently discussing the allocation issue of 12nm capacity.

6. Mobileye Profit Warning Is A Harbinger Of Gloom As Q423 Earnings Loom

By William Keating, Ingenuity

• From a growth forecast of >20% YoY just two months ago, 2024 is now pegged as a low-to-no growth year
• This will be a big negative for the likes of Infineon, ST Microelectronics, NXP, Globalfoundries and HH Grace, among others. 
• Our anticipated gloomy Q423 earnings season just got a whole lot gloomier

7. ‘Clippy’ Having the Last Laugh? Microsoft’s Design Change to Drive AI PC Adoption; Dell Trade Update

By Vincent Fernando, CFA, Zero One

• On January 4th, Microsoft announced a design change for PCs whereby a new physical key will be added to PC keyboards; the Microsoft Copilot key.
• Microsoft Copilot will become a must-have for companies in our view. Initial Copilot capabilities can dramatically improve worker productivity and this should help drive AI PC upgrades for the industry.
• CES 2024 Jan 9th – 12th will showcase AI PC models sporting Intel’s Core Ultra processors and Microsoft’s new Copilot key. We also update our Dell vs. Taiwan PCs trade.

8. Vanguard (5347.TT): 1Q24F Revenue Might Decline ~10% QoQ.

By Patrick Liao

• Vanguard Intl Semiconductor (5347 TT) is likely to see that there could be a decline of around 10% QoQ in 1Q24F.
• In terms of revenue contribution, Taiwan, US, China, Europe, and Japan account for approximately 40%, 20%, 15%, 15%, and 10% respectively.
• Taiwan Semiconductor (TSMC) (2330 TT) may give up technology development at 40nm and above and transfer them to Vanguard.