Weekly Top Ten Tech Hardware and Semiconductor – Sep 22, 2024

1. Taiwan Dual-Listings Monitor: TSMC Returning to Higher Trading Range? ASE’s Two Upcoming Events

By Vincent Fernando, CFA, Zero One

• TSMC: +16.6% Premium; Returning to the 15 – 20% Trading Range?
• UMC: +0.5% Premium; Near the Middle of the Historical Trading Range
• ASE: +5.2% Premium; Participating in Two Investor Conferences in Next Two Weeks

2. Lattice Semiconductor

By Douglas O’Laughlin, Fabricated Knowledge

• It’s an exciting time when your favorite semiconductor CEO comes out of “retirement” to return as a CEO.
• Mine is personally Ford Tamer, who drove Inphi to ship the best DSP in the market against much larger competitors at a much faster pace.
• In my opinion, Inphi was almost a miracle story in semiconductors. It was a literal David versus Goliath, and the man who led the team was Ford.

3. Intel. US DoD & AWS Deals Are Distractions While The Head Remains Firmly In The Sand

By William Keating, Ingenuity

• US DoD & AWS deals are little more than distractions from the main event
• Making Intel Foundry a subsidiary won’t make one whit of a difference but may just be the next step in its eventual spin-off
• The core issue, the GM collapse in Q224, was not addressed in the BM update from the CEO. That’s a problem. 

4. Taiwan Tech Weekly: TSMC Apple Arizona Production Milestone, Samsung 3nm Yield Still Weak Vs. TSMC

By Vincent Fernando, CFA, Zero One

• TSMC’s U.S. Production Strategy Achieves Major Milestone – Begins Production of Apple A16 Chips in Arizona
• Reports of Apple’s Disappointing Initial iPhone 16 Sales Data; Key Taiwan Suppliers Top Losers Recently
• Samsung Falling Behind TSMC – New Report of Low Yields Continuing to Plague Samsung’s 3nm AI Processors

5. Hezbollah’s Pager Explosions and South Korea’s Security Breach – Implications for Tech Supply Chains

By Vincent Fernando, CFA, Zero One

• Explosive pagers linked to Hezbollah attacks spark controversy for a Taiwanese brand.
• Not just Lebanon – today it was reported that the South Korean military removed Chinese-made CCTV cameras after secret backdoors were detected.
• A counter-intuitive conclusion: Despite recent news, is the trend ultimately positive for Taiwanese tech hardware makers?

6. PC Monitor: Microsoft Copilot Wave 2 Unveils Major AI Boost; Reiterate Structural Long for PC Makers

By Vincent Fernando, CFA, Zero One

• Microsoft today announced a major Copilot update, called “Wave 2”, introducing a new collaborative interface and enhanced Copilot capabilities across all major Office apps.
• Copilot continues to gain momentum with large corporations, as Microsoft announced today that Vodafone has adopted it for 68,000 employees.
• We remain Structurally Long PC Makers – We continue to believe Microsoft’s Copilot will drive PC upgrades as users recognize the productivity benefits of faster ‘AI PCs’. 

7. Current Semi Surge Still Strong

By Jim Handy, Objective Analysis

• The semiconductor market is currently enjoying an AI-driven demand surge
• The past two demand-driven surges have turned into collapses as growth returned to the long-term trend
• When we compare the past two cycles to the current one, it appears that a collapse could occur relatively soon

8. ChatGPT o1 (Strawberry) and Memory

By Douglas O’Laughlin, Fabricated Knowledge

• Strawberry was a breakthrough. Some people ask, “What’s the big deal?” but feasibly, there is a new scaling law working in tandem with training, and that’s the Chain of Thought / Inference.
• The chart below is a bit confusing, but the conclusion is the longer the model “thinks,” the better the answer.
• The new model has another log-linear scaling law. It pretty much computes, and the Bitter Lesson wins again.

9. Global Semi Sales Strength Continues In July. How Long Can It Last?

By William Keating, Ingenuity

• Global semiconductor sales for the month of July 2024 amounted to $51.3 billion, representing an increase of 18.7% increase YoY and a 2.7% increase MoM
• The July revenue number was the second highest monthly semiconductor revenue ever recorded, the highest being $51.7 billion in May 2022
• Increasing memory prices along with modest recoveries in both PC and Smartphone unit shipments will continue to drive semi sales higher through EOY 2024.

10. Kokusai Electric (6525 JP): Sell-Off Presents Buying Opportunity

By Scott Foster, LightStream Research

• Kokusai has dropped 44% from its July peak, offering a long-term opportunity at reasonably attractive valuations. Management’s guidance looks conservative.
• KKR has reduced its stake from 43.4% to 23.2%, increasing the float while indicating that it still sees a long-term opportunity. Applied Materials has bought 14.7% of the company.
• The completion of a new factory in Japan should double production capacity to meet demand from makers of AI processors, high-bandwidth memory, 3D NAND and power devices.