You are much more knowledgeable on the technical side. SIMO is fabless so someone makes it for them. All I try to point out is the best economics of this transceiver for Samsugn is just to buy it from SIMO.
By the way, it looks the market sentiment is fading away and most of the traders will probably forget about this until Samsung launches S6. I personally likes it because this extra time allows the ones in the know to add at discount.
If you ever shopped on Taobao, you know it is the most important market portal for all the counterfeit. Stop limiting your thinking just on UGG boots or the likes. Almost all the Chinese domestic made products with domestic brands, if any of them carry a good market image, you can bet it has counterfeits all over Taobao. Those are the real volumes and those are how small Chinese producers compete. It looks like the Chinese government may do something about that, but that will not only take those sellers off Taobao, but also raise product prices (since the real ones are more expensive).
End result, double hit on Taobao volume, and BABA earnings! This stock is fair valued at $60.
1. Q4 DRAM shipment grow 18%, nand 30%, leading 28% growth of quarterly operating profit, and a record year for both revenue and net income.
2. For 2015, the company will expand TLC and SSD productions for the first half, and 3D for the second half.
It looks like SK Hynix has its act together a lot better than SNDK or Micron, and its 2015 plan ties really well with what Wallace tries to do at SIMO - a good evidence to support the growth story of SIMO with SK Hynix as its biggest customer.
If history is any indication, Samsung will launch S6 early March. Rumors say at the World Mobile Congress, but with the huge profit decline last year due to S5 failure, people's heads are on the line if this launch fails again so I would not be surprised that Samsung do another stand alone launch. On top of that, I think the new phone has to really feel "different" to attract buyers back. This possibility that Samsung dumping 810 appear to show that Samsung is willing gamble BIG this time around.
To be honest, I still cannot believe that the Samsung baseband will be put on the world stage for its most important flagship model.
I do not think manufacturing capability is the issue. Samsung can make anything if it wants to, but Samsung will not just take the design print, make it, and invite a huge law suit that it for sure will lose with a big penalty (that will be payout day for SIMO!). It does not make much economic sense for Samsung to buy the company from SIMO because they have to pay a premium, otherwise SIMO shareholder will sue. If Samsung buys it, the cost for Samsung to run this operation will also be higher. On the other hand, developing 5G makes a lot of sense for Samsung because that allows Samsung to be the "standard" holder and charge others for royalty, borrowing a page from QCOM's playbook. Executing large volume baseband (or transceiver) is not an issue for either Samsung or SIMO
The real issue is whether the Samsung baseband with SIMO transceiver is good enough on the world stage, not just Korea.
Samsung does not have an in-house 4G transceiver, although it is working on a 5G transceiver for the 2018-2020 timeline. It takes a long time for a baseband to get carrier confirmation around the world so it is not easy for Samsung to change a component overnight.
Wallace could not say anything because SIMO cannot be the one to make it public that QCOM will not get S6. Technically he has not violated any shareholder fiduciary responsibility either because until Samsung announce it, it is not a done deal yet, or because SIMO is bind by customer confidentiality.
I would like to point out 2 extras:
1. The QCOM release says it expect 810 will NOT be in a large customer's flagship model. It is NOT getting a smaller share, but a complete drop - this means if Samsung's baseband becomes the default component, it will have very good volume.
2. SIMO will have little need to expand resources if the volume goes up because it is still one customer. This means incremental sales volume will have a very higher operating margin!
Nobody said who it is, but jut simply connecting the dots says it is Samsung because only Samsung qualifies as a "major" customer. How much QCOM share is down also tells the same story.
It is frustrating that traders always try to take this stock down after earnings. It feels good that they got this one wrong!
Have anyone seen it? QCOM just announced that its chip is to be skipped by a major customer!
Door is wide open for SIMO LTE transceiver but do not open the bottle yet because until we see Samsung unveiling of S6, we on't know for sure Samsung will stick its own baseband (with SIMO transceiver) in it.
But at least the door is open!
Back October, they initiated with $34. So he is becoming conservative as well, but he asked pretty good questions today.
Thank you - this is one of the quicker confirmations for the recent quarters. Guess analysts liked what they heard today as well.
Forgot to add - Wallace forecast 2015 nand supply higher than demand: this will be a + for SIMO because higher supply leads to lower prices and wider adoption while SIMO ASP stays stable (this is their forecast). I pointed out this path a few months ago and am glad to see it is happening.
1. eMMC 25%+ mkt share, grow at least mkt (15-20%) in 15, goal of 40% mkt share (imply above mkt growth)
2. 4 nand partners (1 more), 3 tier-1 PC OEM shipping, TLC SSD controller shipping in Q1 (new)
3. Multiple projects on multiple gen nand - strong pipeline implying next 2-3 years growth covered
4. TLC SSD for data center - sounds like their solution competitively very pioneer and unique
5. Lots of emphasis on advantages of their technology - hardware + firmware
6. Both SSD and LTE projections based on existing win (implied for SSD) - upside more likely
7. GM has cushion to allow more aggressive pricing on card business
8. PCiE controller shipping 2H/15, but real growth in 2016
9. LTE to Chinese vendors actually happening, but very small
So in short, 2015 projection is very conservative: (1) They already said they will grow eMMC above market (goal to achieve 40% market share), but they stick to market growth for forecast. (2) They implied SSD growth based on existing wins, but they have been adding wins every quarter, and it is doubtful they have counted TLC SSD controllers sufficiently, especially those for data centers. (3) More aggressive pricing for cards may slow down decline, but that may not be counted either. (4) LTE based on existing wins only.
Based on the call, the most recent 100 share sellers to get it down $1.5+ are really trying to screw things up because we have a very strong guidance. They should go outside if they live in NYC so they can wake up!
Forgot about the 1st TLC shipment. Agree with your assessment, and hope Wallace not too excited tomorrow morning - if we have more than a few 100/share sellers like what is happening right now tomorrow, we may be able to get a few shares more at discounted prices. That would not be bad.
I am not sure we need them to raise tomorrow (and they will not say a meaningful word on LTE either). With this projection, I would be buying more if there are enough people who decide to "get out of the dead money"...
1. They have $195MM in cash. So net of that share price is about $20.4. In other words, it has a forward P/E of less than 10 with a mid-point 2015 growth of 20%.
2. They added 4th nand partner for SSD controllers - they seem to have scooped up all the players: Micron, SK Hynix, Intel and SNDK/Toshiba - who do I miss? On top of that, their storage channel to 3 tier-1 PC OEM has started. Would Marvel start to worry?
3. SK Hynix and eMMC will continue to grow in 2015.
4. No mention of LTE transceiver, staying at the old $12MM (which lead to potential upside).
So where is the downside risk at $
I do not recall SIMO not announcing dividend before earnings ever since they implemented dividend. Does this mean that it will be a higher number for 2015, or they are going to announce another stock repurchase?