Forbes: Discuss some of these. You mentioned Qualcomm, SanDisk, Broadcom.
Eiswert: Yeah. So another thing. Being an active investor and trying to look for change and believing that change in tech drives alpha over time, the way we think about semiconductors, we think, is fundamentally different. It's not so much who has the biggest factory and who can drive the most processing power; again, it's about battery life. But it's also about integration. So the ability to integrate different parts of a semiconductor together to lower the cost. Because you have to deliver this device to billions of people, but it has to be at the right cost.
So, if you look at Broadcom and Qualcomm, both companies use an ARM instruction set to build their chips. Both have a significant amount of intellectual property in how you build chips. But both can integrate multiple parts of the system. For instance, an application processor, which is the CPU of a cell phone, with the modem, with Bluetooth, with GPS, can integrate this all into a single chip and deliver this chip into a device that maybe costs $300 as opposed to $500. And maybe has a battery life of 20 hours versus four hours.
Qualcomm also has fundamental intellectual property around how we do wireless. And so Qualcomm is a company that receives a royalty on every device sold in the world that has a 3G or 4G modem in it. We think that it's clear that connectivity is going to explode. So owning a name like that has advantages in how you build semiconductors, but also advantages in the business model or the economics of this roll-out in adoption of wireless. So those are two names that jump out.
There are smaller names that we look at, too. We own TriQuint Semiconductor. This is a company that has a $2 billion market cap and they make power amplifiers. And the thing about a power amplifier, it goes into any kind of radio. The thing about the way we're building new devices is we're putting more and more radios per device.
So if you can own a company that, where their market size from an old cell phone, from a feature phone to a smartphone, you go from one power amplifier to four power amplifiers -- a very positive change in terms of looking at the economics for that company in this space.
So those are really on the chip side. In general, we think the other area around chips is -- we think semiconductor capital equipment is being under appreciated. Because in order to build these chips for all these people, you're going to have to make huge advances in semiconductor capital equipment.
I guess I'm too salty to get too excited about this....been there. They mark it up on the Friday before holiday and we're coming into the slow summer doldrums of the market where Mondays (tuesday is monday this week) and Fridays are traditionally slow, so they'll likely mark it up tommorow too on light volume. Then you have these shills saying they own TQNT. Why? Because they're accumulating? Not likely.
TQNT is 650% off its 2008 low; it's last drive is extended. It needs a major correction. Just be careful. Wall Street is a machine; always has been.