67 WALL STREET, New York - January 18, 2012 - The Wall Street Transcript has just published its Semiconductors Report offering a timely review of the sector to serious investors and industry executives. This Semiconductors Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Energy Efficiency, Cloud Computing and Telecommunications - Semiconductor Content Increase Across Verticals - Semiconductor Manufacturer Consolidation
Companies include: ARM Holdings' (ARMH); AMD (AMD); AT&T (T); ATI (ATI); AUO (AUO) and many more.
In the following brief excerpt from the Semiconductors Report, interviewees discuss the outlook for the sector and for investors.
Kevin Cassidy joined the Stifel, Nicolaus & Co., Inc., research team in connection with Stifel's acquisition of Thomas Weisel Partners LLC in July of 2010. Mr. Cassidy joined Thomas Weisel Partners in August 2007, covering the power management and broadline segments of the semiconductor industry. Prior to joining TWP, he was a Research Analyst at Piper Jaffray & Co. Mr. Cassidy brings over 20 years of practical semiconductor industry experience through various sales positions. He has an electrical engineering degree from the University at Buffalo, The State University of New York, and a B.S. in mathematics and physics from SUNY Geneseo.
TWST: What are some of the big exciting things that are happening?
Mr. Cassidy: Let's take a look at a little history. If you even go back to Tom Watson who started IBM (IBM), IBM made these big mainframe computers that filled up floors and rooms and everyone had at their desk a dumb terminal. It was just a way to input/output to communicate to the big mainframe that was in the building downstairs somewhere. Following the mainframe was the minicomputer which distributed processing power among various tasks.
Then personal computers were invented and much of that processing power moved away from the mainframe, and went on to the PC and everyone had their own data and everything was personal computers. That was a change. Now the way I view it is you're still getting that processing power locally, but there is so much data that people want and the Internet is fast enough now that you want to be able to reach out to a central computer source and access information without having to store it on your desktop or handheld. Think of it as the old mainframe. That's the data center now or the cloud computing. Companies like Apple (AAPL) or Google (GOOG) will hold all your pictures and movies and all these things that take up a lot of memory, and they'll put that in the data center for users to access. That is what is driving the build out of all these data centers. These data centers use a lot of power, so they are looking for the cheapest sources of power.
Facebook has been most public about it recently. They're building 500,000 servers in one building. It's four football fields big, and all these pictures and videos that are on Facebook are stored there. What's driving that? The more Facebook holds for you in their data center/cloud, the more mobile you can be. Now you can use your phone to access this data, and you can be anywhere in the world. You don't have to be at your desk to get the data. The more mobile people are, and the more you give processing power and better Internet connection on mobile products, the more you're going to need the data center. They go through different spurts of growth. The iPhone revolutionized using your cellphone to access the Internet, so now we're in this growth spurt of the data centers getting built out to support all these mobile applications that are accessing the Internet.
TWST: Are there other important drivers in the space?
Mr. Cassidy: When the iPhone first came out, you remember how AT&T (T) network got bogged down because everyone was on the network accessing data. Users were getting kicked off because there just wasn't enough bandwidth. So now all the wireless carriers are expanding their capacity. The carriers need more bandwidth - or bigger roads, if you think of it that way. They need higher-speed connections, and that's what 4G or LTE networks offer. These are new base stations, new antennas that are being built around cities to offload all the data traffic so that the 3G networks can run voice again and not get bogged down. There is good growth in the communications. All the ways that we communicate electronically are being upgraded.
That's not as obvious for the average consumer, but it's a huge growth market. In the U.S., there are 300 million people. In China, it's billions of people, and there's three different phone networks in China. One is China Mobile (CHL). China Mobile has 600 million subscribers, and they're mostly all still using 2G. They haven't even moved up to 3G yet. China is deploying antennas to support 3G signals. This should result in all those people to buy new phones and upgrade to 3G connections. This is a marketing person's dream. The inflation rate for China for wages is somewhere close to 20%. So they're making more money, they have more disposable income, and they can afford to buy these 3G phones now.
What really drives all of the capability of being able to have all that horse power in your handset is because they keep making transistors smaller and smaller. The comparison is the mainframe that used to take up the full basement of a building. You now have that much processing power in your hand with a phone, and the cost and all that it's what makes it - it's solving some of the world's problems.
TWST: From an investment standpoint, what do you look for in the space?
Mr. Cassidy: I look for markets that are growing the most, and then I look for companies that have a unique feature in those markets where they have pricing power and they can outgrow the market. Every generation of integrated circuits is more difficult to manufacture these chips. In our view, Intel is the leader in the manufacturing process.
There is a growing gap between Intel and the next player integrated circuit manufacturer. Many semiconductor companies have given up on internal IC manufacturing. These companies contract foundries to manufacture for them. A foundry manufactures for a fee. Intel and Samsung (005930.KS) are some of the only semiconductor companies left that manufacture their own product. We see this as a unique capability of Intel.
TWST: What are your favorite stocks in the space right now and why?
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This Semiconductors Report is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
For Information on subscribing to The Wall Street Transcript, please call 800/246-7673
There are no comments yet