|SIMO will likely pre-announce revenues and gross margins Friday morning or Monday morning.|
As a reminder the guidance from the Q2 call was for Q3 revenues to be between $122m and $129m, and Q3 gross margins to be between 44.9% and 46.9%.
Both of these numbers are expected to be low points in the cycle, and both should head up from here for the foreseeable future.
We shall see what happens, but if things just go according to expectations SIMO's long year of drought will hopefully come to an end, and we can see revenues, gross margins and share price appreciation return.
All the news about NAND supply in 2018 increasing sufficiently to meet demand is really good for SIMO. In general SIMO's products go into the lower mass market area of the NAND space. When NAND supply is tight (as in the past 4 quarters) the NAND makes dedicate most of their NAND product to their own high margin high end enterprise NAND products, and starve the low end where SIMO is involved. When NAND supply is excessive, all the module makers and cost sensitive product makers can get NAND, and those are the guys that use SIMO controllers. So......hopefully the NAND drought of the last 4 quarters turns into a NAND flood by next summer, and SIMO's revenues respond to the flood surge with their own surge.
But....anything can happen!
We still have the question of whether SK Hynix will go it alone in the transtion from eMMC (currently 100% sourcing controllers from SIMO) to UFS (no commitment to source anything from SIMO) in cell phone connectivity. And we hope SIMO still has Ali Baba as a customer for it's Shannon Enterprise SSDs, maybe Ali Baba has switched providers, who knows?
PC SSDs seem like a slam dunk to do well when NAND production ramps, SIMO has a diverse customer base in that area, but in the other two areas (cell phone eMMC/UFS controllers and Shannon enterprise SSDs) SIMO is highly dependent on ONE customer (Sk in eMMC/UFS and Ali Baba in Shannon), so we gotta hope the relationships with them stay strong.
And the interesting bit is SIMO's discussion of enterprise SSD controllers. They said they have two customers who will begin purchasing product in the latter half of 2017. I don't think the volumes are terribly large in enterprise SSD controllers, and two customers may not move the needle, but who knows? Hopefully enterprise SSD controllers is a new 4th area that grows steadily over time as merchant provider SIMO grabs share from internal controller groups. That's what happened in the client space, I don't see any reason why it won't happen in the enterprise space. SIMO will begin at the low end of the enterprise SSD market, make an inexpensive working product, and move up the technology stack. Hopefully!
And one last wildcard is the Chinese NAND makers. China has committed to entering the 3D NAND production, and I think they are expected to produce and ship 32 layer 3D NAND product that is ~2 years behind the current NAND makers. They will need controllers, SIMO is the logical place to get them. If China can produce 3D NAND, this could be a big story for SIMO in 2018 at some point. Even if the Chinese NAND makers are not profitable, they or their customers will need SIMO NAND controllers to make any final product.
If NAND production is going to ramp meaningfully in 2018, short the NAND makers and long SIMO is the way to invest in that trend. Hopefully institutional investors are reading this post!