4G LTE Infrastructure Growth Drives Demand For 28 Nanometer Snapdragon And Other Key Semiconductor Chipset Components: FBR Capital Markets Expert Analyst Picks Stocks That Will Gain Throughout The Cycle

Wall Street Transcript

67 WALL STREET, New York - August 2, 2012 - The Wall Street Transcript has just published its Wireless Communications & Telecom Report. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: 4G Infrastructure Capital Expenditures - Tower Cell Splitting - Global Wireless Spectrum Allocation - Telco Dividend Yields

Companies include: QUALCOMM Inc. (QCOM), Intel Corporation (INTC), Apple Inc. (AAPL), Nokia Corp. (NOK), Broadcom Corp. (BRCM), Altera Corp. (ALTR), Xilinx Inc. (XLNX), Skyworks Solutions Inc. (SWKS), TriQuint Semiconductor, Inc. (TQNT), RF Micro Devices Inc. (RFMD), Taiwan Semiconductor Manufactu (TSM), United Microelectronics Corpor (UMC), NVIDIA Corporation (NVDA), Marvell Technology Group Ltd. (MRVL), Research In Motion Ltd. (RIMM)

The following interview excerpt is from an interview with Forbes Number 1 rated analyst Craig Berger of FBR Capital Markets:

TWST: We talked about Qualcomm (QCOM). Who else do you like right now, and why do you like them?

Mr. Berger: Broadcom (BRCM) is a company that I really like. They have wireless exposure. They're selling connectivity chips into the iPhone and iPad. They're selling basebands into new Samsung smartphones as well. Now, they're doing less of the cellular baseband processor, and they're doing more of the Wi-Fi Bluetooth wireless connectivity. They also sell cellular basebands, but they're not as big as Qualcomm. They are more in the Bluetooth Wi-Fi connectivity bucket, but I do like Broadcom.

They have exposure to comm networking, wireless base stations and infrastructure, which is a relative bright spot. They have all the wireless exposure I mentioned, selling into Apple and Samsung. So they have a good mix of business for both wireless and wireline infrastructure applications.

TWST: Anybody worth mentioning right now?

Mr. Berger: In wireless, there's a host of companies that I don't cover, that I don't have a formal opinion on, but that are referred to in the space. A couple of the guys that sell into the wireless base station and infrastructure markets are Altera (ALTR) and Xilinx (XLNX). They seem well positioned from a products perspective.

A couple other firms that sell into the cellular space - they don't do the main baseband processor, but rather smaller supporting chips called power amplifiers - and are tied to the Apple (AAPL) supply chain are Skyworks (SWKS), Avago (AVGO) and Triquint (TQNT). Another firm in that same bucket that does not sell into Apple is RF Micro Devices (RFMD). Like I said, I don't cover those, I don't have an official rating, but I know people that like the Apple supply chain, the iPhone supply chain, use Skyworks and Avago as key plays there, along with Qualcomm and Broadcom.

TWST: What about internal production of the actual semiconductors? Are they produced mostly overseas?

Mr. Berger: Most of the world's semiconductors are made overseas, because that's where the most cost-efficient structure is located. There is still some manufacturing here in the United States, but it is modest. If you look at Qualcomm and Broadcom, those guys are fabless semiconductor companies, so they don't have their own fabrication facilities, and they manufacture entirely 100% in Asia, mostly with Taiwan Semiconductor (TSM), but also with UMC (UMC) and Samsung.

If you look at some of the smaller, nichier guys like Skyworks or RFMD, they still have some older fabs in the United States, but that is a very small piece of total consumption. The fact of the matter is with all of the taxes and health care costs, inflation costs, regulatory costs and whatnot, its just not feasible to manufacture in the U.S. and have an attractive cost structure.

TWST: Related to that, are there any supply concerns?

Mr. Berger: The very latest and greatest process node, 28 nanometer, has been supply constrained. That's the process that Qualcomm is utilizing to make their 4G LTE chips, also called Snapdragon chips. Snapdragon has been in short supply, but they are working through the issues.

Apple is going to use some Qualcomm 4G LTE chips. I would assume, because they're Apple, they will not suffer from lack of supply the way that some other companies may. Anybody else further down the pecking order might be impacted, but I think they are working out their supply constraints slowly. Other than that, supply is generally not an issue in the sector right now, though cyclically it can arise as an issue from time to time.

TWST: What about valuations in the space?

For more from this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers, and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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