Monday, January 25, 2016

CEO Chattershoot

I am desperately trying to avoid mainstream media right now. Doom and gloom sells. Idiots running rampant. Exclamation points are working overtime.  

Such is life on today's Internet.

2016 is not looking like a great year for those focused on the broadest measures of the semiconductor industry. The biggest markets, smartphones and PCs, are mature and saturated. There is anticipation in the analyst ranks that a bounce in PC sales, after an abysmal stretch, is forthcoming. Given the misplaced optimism of the past I wouldn't bet the ranch on it. These two product lines, smartphones and PCs, have become replacement markets and while there is still growth, the pace is far from what we have experienced over the last 30 years. The emerging market, 3rd Wave, IoT, IoE, Sensorization, however you want to define it, is not going to blow chip demand through the roof in the very near future. Long term, there is no denying the possibilities. I'll be writing more about this in future posts.

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Ed Sperling serves up 10 high level interviews with CEOs representing parts of the chip industry:
http://semiengineering.com/ceo-outlook-2016/

The subjects expressed by these executives are not all that surprising: Continuing M&A, the emerging market known as IoT, continued growth of semiconductor content in automobiles, questionable demand for new smartphones, the need for better power management, more innovation, more R&D spending and macroeconomic turbulence.

ARM' CEO, Simon Segars, comments that the outlook for market growth in 2016 is not fantastic and that pricing pressures will lead to more M&A. Synergy and innovation, in Mr. Segars view, are the positives that come from these trends.

Amkor's CEO, Steve Kelley. pins success in 2016 to the embrace of new smartphones from Apple and Samsung. He points out that 55% of the semiconductor market is tied to the mobile world.  Have to admit, that's sort of frightening when one considers recent news about weak demand for smartphones.

Jack Harding voiced a realistic opinion that looked positively at the long term impact of the IoT but at the same time downplayed the near term. Like Mr. Segars, Mr, Harding is hopeful that M&A ultimately generates innovation and more dollars for R&D. Mr. Harding voiced concerns about the macroeconomic scene - a question mark for everyone these days.

I am not going to go through each one....  You can read the rest here:  http://semiengineering.com/ceo-outlook-2016/   

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Mentor Graphics CEO Wally Rhines has offered a review and preview at several publications over the last few years. His take on 2015 and 2016 can be found at the Tech Design Forum:

Part I:  http://www.techdesignforums.com/practice/technique/walden-rhines-2015-review/

In my opinion the comments about chipsets becoming commoditized, another part I've talked about over the years and one that is definitely related to the maturation process, is something for investors to keep in mind.
"Until recently, the emergence and rapid growth of smart phones kept the semiconductor market growing, despite some dramatic changes in leadership among the chip providers. But the growth to enormous volumes of cell phone units, the changes in handset and service provider models (like the Xiaomi low-hardware margin approach) and the relative stabilization of standards has reduced the number of suppliers as well as the chip prices. The same thing happened in the PC industry, as the industry consolidated from more than 100 manufacturers of IBM-compatible PCs. While temporarily painful, those remaining companies become very efficient. And, as always, semiconductor companies can prepare for the next great wave of applications that will drive billion-unit volumes of products that are yet to be identified and developed."
Part II contains an outlook for 2016:  http://www.techdesignforums.com/practice/technique/walden-rhines-2016-forecast/

Yes, there is much more to write about..... 

Monday, January 18, 2016

Strategy Read

Two posts in one day!  Mother of all miracles what is going on?

Well, it's a three day weekend for the financial markets and that provides ample time to share what we are reading.  Not that last week's market crush has anything to do with this - we read all the time.

What you will find below is a link to a big picture, macro strategy tome from one of the largest and most successful investment firms in the world.  Sure, there are millions of these out there but this one caught my eye because it speaks to so many things we have been discussing this year.

Now before you get the idea that I am touting KKR I will tell you that I am not.  I've been around long enough to know that no one is going to be 100 percent right and no one is going to be totally wrong.  I read things like this to help me understand what could happen and how I can profit from it.  This has become very important when assessing the health of the end markets.

KKR's Outlook for 2016 is appropriately titled "Adult Swim." I mentioned this in a Tweet (see the stream to the right of this page) but I think it is worth mentioning once again.

Some of the observations are very much mainstream:  tepid global GDP prospects, trouble in the Emerging Markets, pain with China's transition from a manufacturing/export economy to a consumer driven economy, the continued deflation of high risk assets and more volatility.

I do think the sections on credit, the US consumer and trade are worth reading.  Overall it's a piece I highly recommend.  

You can read the web version or download the complete report from this link:

http://www.kkr.com/global-perspectives/publications/outlook-2016-adult-swim-only

Call it, $0.02 for the jar.

Invest or Trade?

A three day weekend has provided us with a good respite from the turmoil in the financial markets.  Not that the turmoil is going to subside anytime soon - we just needed a break.  We needed a break to clear the fog and tune out the noise.

World economies are growing at a snail's pace so questions about end demand have technology investors on the edge of their seats.  News about Apple grabs the center stage each and every day.  Until Apple releases their quarterly the purported weakness in iPhone sales will haunt a good portion of the chip sector.

When Intel reported last week very few were expecting strong numbers.  There were indications from the motherboard houses that PC and notebook builds were waning.  The datacenter group continues to lead the charge but even growth rates in that segment slowed (granted, there were tough comparisons against the previous year but slower is slower no matter how you slice it).  Intel's memory business is growing nicely but it's not a needle mover.  If all the production issues are put to bed 3D XPoint will take the center stage in the last half of this year.  3D XPoint is much, much more important than the memory that comes off today's production line.

A good summary of the Intel earnings report can be found here: http://www.nextplatform.com/2016/01/15/the-glass-house-is-still-intels-piggy-bank/

Here's a decent piece on 3D XPoint as presented during this year's Industry Strategy Symposium:  http://www.eetimes.com/document.asp?doc_id=1328682

Not to be forgotten, the next quarterly report will shed some light on the integration of Altera's $400 million quarterly run rate.  Not much was said on the conference call other than things seem to be moving forward.  FPGA sales are tightly linked to growth in the economy,  Keep that in mind.

As the end markets for smartphones and PCs mature the IoT has become the next big driver for all things semiconductor.  IoT encompasses just about anything you can fathom and one can only surmise that it is in the nascent stage of implementation.  The biggest players in the chip business are screaming from the rooftops but Wall Street seems reluctant bite on the hype (I tend to agree).      

A couple of links for posterity:

Intel's IoT hoopla was all over the news during CES:

 http://www.pcworld.com/article/3019557/internet-of-things/intel-embraces-internet-of-things-puts-sensors-on-everything.html

Global Foundries foresees a Golden Age (seriously?):

http://www.timesunion.com/business/article/GlobalFoundries-sees-golden-age-of-chips-in-6754275.php

And Marc Andreesen grabs on to the 3rd technological revolution, aka, "Sensorization":

http://www.telegraph.co.uk/technology/internet/12050185/Marc-Andreessen-In-20-years-every-physical-item-will-have-a-chip-implanted-in-it.html


I could probably create a Drudge-like page and fill it with stories hyping the IoT.

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Does one belly up and buy chip stocks, Intel, on this weakness?  Volatility in the markets is exceptional right now so opportunities to trade, if one has such an inclination, are available on a daily basis.  Given how I am viewing the coming year I feel as though trading seems like the right strategy.

Of course, I reserve the right to change my mind at the drop of hat.

     




Saturday, January 09, 2016

Market Tuition

During a year end Skype chat with some market participants I have known for a long time, I expressed my bullishness about the coming year.  <ahem>

Right on cue, global equity markets pummeled my view by dropping like a lead balloon. You name it, we got it. A crash in the Chinese market, lower and lower oil prices, weak economic reports, gloom and doom from Apple's supply chain, and a super-sized serving of financial media/pundit pessimism.

Yeah, I know things.....

By no stretch of the imagination do I believe the world is ending. I realize the *issues* in the global economy and the financial markets are not going away overnight.  In the 30+ years I have been following capital markets I can't tell you how many times the world was about to end. One thing I do know is that every single one of those periods provided the opportunistic investor with a chance to purchase some outstanding bargains.

Patience is key.....  

Earnings season is upon us and the preliminary indications suggest tough sledding in the semiconductor food chain.  During the past week the focus was on the business at Apple. Suppliers Qorvo (QRVO) and Cirrus Logic (CRUS) lowered their numbers. Samsung chipped in with tepid earnings guidance and Hon Hai Precision saw December sales drop 20%. TSMC's December sales were down 16% year-over-year and 8% vs. November sales.

I could go on but you get the drift. Taking just these few into consideration is enough to give one pause. Weakness appears widespread and no one wants to own a company that is about to release a crappy report.  These next few weeks will be telling.

From a strategy perspective my top priority is to check my ego at the door and really focus on what the tape is saying. Opportunities are going to appear - it is not a matter of if, but when.  

From a non-market perspective I am on a quest to do more research on disruptive technologies. It really feels like we have reached a tipping point where years of R&D in the tiny-science field will soon touch a market near you.  More to be said about this in future missives.  

Monday, January 04, 2016

Domain Transfer

FYI....   The transfer of the infras.com domain has been initiated and barring any blackholes in the transfer process the address of this site will soon change to www.infras.com.   According to the engineers at the hosting companies the transfer process could take 5 to 7 business days.

So, if you happen to be one of the faithful that actually ventures over here be forewarned that there may be a brief dead period.

Personally, I am quite happy about this because forward momentum is a good thing!  :-)

Carl

Saturday, January 02, 2016

Good Intentions - No Follow Through

Sadly, I have neglected this site for almost a full year.  How dreadful......

The goal of publishing more often was set aside and given little consideration for reasons too tedious to explain.  Time just seemed to slip away.

Believe it or not, I have been following the developments in technology and I have been constantly in touch with the action in the financial markets.  There are a few folks out there that can attest to this but when it comes to this website that means little because there is nothing here to show for it

I'll be rewriting some pages, transferring the infras.com domain to Google (yes, I still own it) and filling some archives over the coming days.  Changes are necessary.

It is the start of a new year (saying this is so lame - isn't everyday the start of a new year?) and, once again, hope springs eternal.

Carl

Friday, February 06, 2015

When Energy EPS Drops....

According to the Investment Strategists at Well Fargo there is hope for the IT, Healthcare and Consumer Discretionary sectors when energy prices drop.   Here's an excerpt from this piece: https://www.wellsfargoadvisors.com/market-economy/economic-market-reports/stock-market-trend.htm

When Energy-sector earnings declined by 32 percent in the one-year period ending on March 31, 1998, the best earnings-growth rates over the next 12 months were generated by the Information Technology, Health Care, and Consumer Discretionary sectors. The comparisons for first-quarter 1998 through fourth-quarter 1999 are as follows:

Click the image to see a larger view.

Related, here's a clipping related to the current state of earnings releases from StockTwits:

http://stocktwits.com/SeanDavid/message/32321971?utm_medium=community-twitter&utm_source=t.co&utm_campaign=outboundteam:


Last but not least, a nice set of charts about the oil industry:

http://fingfx.thomsonreuters.com/2015/02/05/115242db8e.pdf



Wednesday, February 04, 2015

The ITRS is Now Focusing on Systems

Unreal...   I have been talking about this transition for years and, lo and behold, the ITRS (International Technology Roadmap for Semiconductors) is now doing the same:


Focus areas:

In an IEEE paper published late last year titled “ITRS 2.0: Toward a Re-Framing of the Semiconductor Technology Roadmap,” the roadmappers explain why it’s time for a change. “As new requirements from applications such as data center, mobility, and context-aware computing emerge, the existing roadmapping methodology is unable to capture the entire evolution of the current semiconductor industry. Today, comprehending how key markets and applications drive the process, design and integration technology roadmap requires new system-level studies along with chip-level studies.”

The ITRS roadmapping committee has already been reorganized to focus on ITRS 2.0. There are now seven groups focused on what ITRS chairman Paolo Gargini calls the seven “building blocks.” 
  • System Integration—studies and recommends system architectures to meet the needs of the industry. It prescribes ways of assembling heterogeneous building blocks into coherent systems.
  • Outside System Connectivity—refers to physical and wireless technologies that connect different parts of systems.
  • Heterogeneous Integration—refers to the integration of separately manufactured technologies that in the aggregate provide enhanced functionality.
  • Heterogeneous Components —describes devices that do not necessarily scale according to “Moore’s Law,” and provide additional functionalities, such as power generation and management, or sensing and actuating.
  • Beyond CMOS—describes devices, focused on new physical states, which provide functional scaling substantially beyond CMOS, such as spin-based devices, ferromagnetic logic, and atomic switch.
  • More Moore—refers to the continued shrinking of horizontal and vertical physical feature sizes to reduce cost and improve performance.
  • Factory Integration consists of tools and processes necessary to produce items at affordable cost in high volume.
I have met ITRS Chairman Paolo Gargini several times during trips to the Industry Strategy Symposium and Semicon West. To say he is distinguished is an understatement:    http://www.semi.org/node/52371   (34 years at Intel speaks volumes) 

Here is a link to a presentation that is quite technical but gives some insight about industry transitions and how long it takes to get them to production-worthy levels.   On page 18 of the presentation there are some pictures of papers depicting FinFet research from '99. '00 and '01.    Page 28 gives an estimate of the incubation time for these transitions (~12 to 15 years!)


You don't have to listen very hard to hear the noise about who is going to be first with 14nm/16nm production.  From there the crowd shouts about who will be the first to 10nm and then 7nm and if you don't like that you can debate who will be the first to produce 3D NAND.   To me, this is really unfortunate because if one were to take the time to go through the confessionals of the past few weeks it would become clear that the bleeding edge, while certainly glamorous, is not the only segment of the chip industry that is enjoying growth.

Investors should make note of this......


Vital Stats from IC Insights

Foreword:  This post is going to need some editing/reorganizing but I wanted to get the charts up here for starters.  

The following charts are from the 1/2 day semiconductor seminar produced by IC Insights:

IC Insights is expecting 7% semiconductor industry growth in 2015.   





















Plenty of food for thought here - much more to add.....


Wednesday, January 21, 2015

Knee Jerk Reactions

I'll get to the Sandisk earnings call this evening but for posterity I wanted to preserve this snapshot because it speaks volumes about members of the financial media.  

First, the news flow from Yahoo Finance:


The headline from The Street is absolutely priceless. 

Next, the after hours quote on the stock:


Yes, this was all on the same page. 

When Sandisk pre-announced a disappointing quarter a few weeks ago the stock got hammered.  Today the final tally was disclosed and even though they lowered the bar they still tripped over it.