Technology
Richard Windsor says MediaTek’s Kompanio Ultra chip sets a new standard for the high end of the Chromebook market and looks to be merely a stone’s throw from Intel and Advanced Micro Devices facing another newcomer in the PC Market. The biggest winner will be Arm, which will see its penetration of PCs accelerate and it will earn higher royalties from MediaTek which buys the processor design and licences the IP. This is neutral for Qualcomm because competition in this space is healthy and will keep the firm on its toes and push it to continue to lead when it comes to performance. INTC and AMD are the real losers here as the x86 architecture looks increasingly obsolete.
Edition: 209
- 18 April, 2025
Technology
The “ouster” of Pat Gelsinger will almost certainly result in INTC being split up, meaning the once all-powerful brand may soon be just a memory. With the company’s future very uncertain and its once great engineering culture in poor shape, INTC is easy pickings for its resurgent competition. Richard Windsor expects to see Qualcomm, AMD and MediaTek redouble their efforts in PCs and the data centre. He has often said that at 10x earnings, one should shut one’s eyes and buy the stock, but because of the falling EPS estimate the valuation has never gotten there. With the company in this much trouble, there is no price at which he would want to buy it.
Edition: 201
- 13 December, 2024
AI: Artificially Inflated
The market is currently valuing revenues from AI at 150x for 2024, which is clearly unsustainable. A significant reset will come soon, with only the big digital ecosystems surviving. Nvidia remains the exception, with a far more reasonable valuation that will result in a much calmer correction when the time comes. Richard Windsor prefers to look more laterally where there is more value to be had. One of these lateral arcs is nuclear power which is going to be needed to power all the data centres and another is inference at the edge (which Microsoft has just championed) where Qualcomm and MediaTek are likely to be the big players.
Edition: 187
- 31 May, 2024
Technology
Management's gross margin guidance is overly optimistic - Qualcomm's aggressive pricing strategy has left MediaTek in a difficult position between protecting margins and not losing market share. Post 4Q22 results, AceCamp lowers their 2023/24 EPS estimates to NT$50.6/NT$44.3 (-32%/-13% y/y), to reflect weaker than expected 1Q23 revenue guidance and higher than expected OPEX guidance. The stock currently trades at 14.4x/16.5x 2023/24 PE, following a 40% rebound from the 3Q22 low. However, given the significant EPS declines forecast and an environment of lukewarm smartphone recovery, a 12-13x PE would be more appropriate.
Edition: 154
- 17 February, 2023
Technology
Although the overall channel and customer inventories reduced aggressively by the end of 3Q22, we are only in the middle of the inventory adjustment cycle. We’ve seen early signs of global inflation peaking, and an initial normalisation in US dollar strength, which supports a recovery in end consumer demand and channel inventory restocking by mid-2023. In Wium Malan's latest piece, he argues that MediaTek's dividend yield (>10%) and PE ratio (11.4x NTM) indicates a meaningful margin of safety in valuation levels, with probabilities skewed towards a positive surprise.
Edition: 151
- 06 January, 2023
Technology
Poor results and weak guidance - this is more about execution than the economy. Instead of 2023 EPS being c.$3.75 (PER 9.6x), EPS is now likely to be $2.00 to $2.25. This (again) brings down the “shut your eyes and buy it” moment from $36 per share to $20. INTC is no longer a value stock as its earnings have evaporated and one must now look through to the recovery. Although this is far from certain as Richard Windsor still has concerns re. the longevity of the x86 processor design and INTC’s financial strength is weakening fast. Qualcomm, MediaTek, and TSMC remain far better places to be in the semiconductor sector at the moment.
Edition: 141
- 05 August, 2022
Technology
The strangest profit warning - Richard Windsor questions the validity of MSFT’s claim that USD strength is to blame and sees a difficult quarter ahead. Looking at the wider Technology sector, he notes that while many stocks have already fallen by 70%+ they could easily halve again. Stick with the value end of the sector and semis in particular. He favours Qualcomm, TSMC and MediaTek as companies with reasonable growth ahead, strong positions in their markets as well as valuations that are less than 15x 2022 PER.
Edition: 137
- 10 June, 2022
MediaTek (2454 TT)
Technology
High-quality 5G beneficiary that also offers a very attractive dividend - earnings upgrade cycle set to continue. MediaTek will experience an outsized benefit from the replacement trend brought by technology upgrades to 5G and Wi-Fi 6, Bluetooth, and ARM-based SoCs that integrate wireless communication. It also boasts net cash of $5.9bn (nearly doubled over the past 2 years); management have raised the dividend payout ratio to 80-85% and budgeted NT$100bn for special cash dividends over the next 4 years. The stock currently trades on a forward dividend yield of 5.2%. TP NT$1292 (40% upside).
Edition: 113
- 25 June, 2021
China Handset Semi Checks
Technology
Westlake's report includes detailed analysis and data on semi shortages, handsets and components inventory and lead times - Qualcomm, MediaTek, Skyworks, Qorvo and Broadcom saw very strong pricing and better-than-guided 1Q demand at Chinese OEMs. Their OEM contacts also observed lower phone inventory in 1Q vs. 4Q, with some indicating 6-7% inventory-to-sales ratio (normal level is 10-12%). Based on fab wafer sizes and technology nodes, the most severe shortages were seen in basebands / SoCs, MCUs, CIS sensors, display ICs and PMICs.
Edition: 109
- 30 April, 2021