| From: Elroy | 7/12/2022 10:34:18 AM | | | | | | Flash device controller production capacity loosening
digitimes.com
The supply of SSD and other NAND flash device controller chips, which are manufactured using 55nm, 40nm and 28nm process technologies at 12-inch fabs, has become less tight as foundries release more available fab capacities for such ICs, according to... |
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| To: Maurice H. Norcott who wrote (2566) | 7/12/2022 1:15:38 PM | | From: Elroy | | | | SIMO said when they gave 2022 full year revenue guidance (up 20% to 30%) that they would increase the forecast if they receive more allocation from TSMC as the year progressed.
It seems likely that they've received more allocation from TSMC. Now we gotta wonder whether their backlog has held up despite the slowdowns in cell phones and PCs, or not.
I'm hoping SIMO can produce really strong Q2 and Q3 results, and perhaps that encourages another buyer to outbid MXL. It's a bummer than SIMO management is prohibited from doing the normal investor calls and providing forward guidance due to the MXL merger agreement. But the quarterly reports don't lie, we're going to get to see the Q2 and Q3 numbers before the deal closes. I would imagine there is some revenue number for Q2 and Q3 that encourages other interested parties to bid more than MXL. Maybe!
I think the fit with MRVL is so good it's hard to believe they wouldn't bid for SIMO. MRVL could make an all stock bid well above MXL's bid, and MRVL could use a cash cow (client flash controllers) to fund the research and development in it's more advanced tech segments. Hopefully they're watching.
I can also see MediaTek perhaps step up in an effort to keep things in Taiwan. |
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| From: Elroy | 7/15/2022 8:24:09 PM | | | | | | I see that the SIMO shareholder vote on the MXL acquisition is scheduled for Aug 31st 2022.
Based on what happened with the AMD-XLNX deal at some point after that vote (assuming the deal is approved), China's SAMR approval will likely be received, and then about 2-4 days later the transaction will go through.
Does anyone have any idea on how long it might take China's SAMR to grant approval? I know there is no way to know for sure, but any opinions? Theoretically, China could grant approval before Aug 31st, and then the deal would go through the first week of September. |
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| From: Elroy | 7/17/2022 7:55:16 PM | | | | | | There's an interested timeline of the acquisition negotiations in the SIMO - MXL prospectus.......
On Feb 28 MXL bid about $110, with the acquisition being 85% cash and 15% MXL stock. MXL at the time was $74.
Goldman inquired with 5 other prospective SIMO buyers after MXL made their offer. Two responded with interest.
Later on March 2, 2022, representatives of Goldman Sachs contacted representatives
of each of the Potentially Interested Parties regarding their respective interest in engaging in discussions about potentially acquiring the Company. Representatives of two of the Potentially Interested Parties, a strategic company (“Bidder A”) and a private equity sponsor (“Bidder B”), expressed interest in further engaging in the process, while the other three Potentially Interested Parties, all of which were strategic companies, ultimately declined to explore the opportunity to potentially acquire the Company.
Both interested parties entered into confidentiality agreements with SIMO-Goldman
The first interested party bid $95 cash!
The second interested party bid $96 cash!
SIMO told the first interested party they need to pay $115-$120.
MXL upped it's bid to about $115, again 85% cash and 15% MXL stock. MXL was $69 at that time.
The first interested party increase its bid to $115 cash!
The second interested party called SIMO to say they were going to raise their bid, but after that they never called back! funny.
On March 31, 2022, representatives of Bidder B called representatives of the Company’s management team to inform them that Bidder B would try to improve the March 24 Bidder B Proposal. However, following this call, Bidder B did not again contact the Company or any of its outside advisors regarding the March 24 Bidder B Proposal or any improvements thereto.
Wow - then Party A - a strategic customer of the company (INTC? MU? SK Hynix? Samsung?) - contacted Goldman Sachs to discuss purchasing SIMO. SIMO declined to enter into acquisition discussions with a strategic customer. Idiots!!
The first interested party said it would not improve its' bid, and that its' bid could no longer be relied upon. Bastards! They think it is because regulatory issues would be a problem for the deal, and first interested party would get stuck with the a "no merger" penalty.
MXL revised its offer to $90 + 0.4532 shares of MXL per SIMO share. That was then worth $110.
Holy Crap, the first interested party sends a letter that says some other (new) private equity firm "Party B" wants to join with the first interested party to make a bid for SIMO! Goldman says hurry the fuck up!
It sounds pretty wild. There was more than four interested buyers. It is in the deal prospectus on about page 79.
They discuss regulatory issues often, and seem concerned about them. |
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| To: Elroy who wrote (2569) | 7/18/2022 3:49:32 PM | | From: Elroy | | | | Based on that negotiation timeline I posted in the previous post, it seems there were a few entities with interest to acquire SIMO. MediaTek was one of the interested buyers, and there was a NAND maker significant customer, and a few private equity shops.
So.....here's my take. SIMO will report Q2 on Jul 27, and then the shareholder vote is scheduled for Aug 31st. If a competitive bid is going to appear, it is likely to appear between those two events. So hopefully August may be interesting for us.
I sort of doubt another entity will bid, but I also don't understand why lots of larger semiconductor firms have determined that they don't want to own SIMO. With SIMO's growth forecasts (provided in the deal prospectus) it seems clear that by 2024 SIMO will be close to a monopoly in eMMC and client SSD flash controllers. Their position in UFS controllers is harder to measure, but in eMMC and client SSD SIMO is going to be the leading dominant provider who gets all the profit from those segments. The segments are necessary, very large, and in the case of eMMC modestly growing, and in the case of client PC SSD probably flat, and "other client SSDs (game consoles, autos, other stuff) growing.
Why don't the big semi boys want to own that market? It's on sale now, and once the sale closes, the opportunity to own it lessens quite a bit - you'd have to buy all of MXL to get it, and MXL may be a good semi story, I don't really know, but MXL is not monopolistic in any of its categories, and being monopolistic is the way to go in tech. |
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| To: Elroy who wrote (2570) | 7/18/2022 6:33:51 PM | | From: Maurice H. Norcott | | | | | I don't know if it makes any sense but maybe SIMO isn't yet big enough to be of interest to a major Semi company in the dollar sense. I recently learned that one of the cigarettes/cigar brands I used to indulge in was discontinued by the parent company, the reason was it only earned $500mil a year as a boutique brand so it was deemed too small a contributor to the bottom line. |
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| To: Maurice H. Norcott who wrote (2571) | 7/19/2022 10:57:36 AM | | From: Elroy | | | | Perhaps, but SIMO isn't that small.
ADI is a huge semi company, it does $2.7b per Q in revenues.
SIMO should be doing $400m per Q by 2024 (if not 2023).
So SIMO is about 15% the size of ADI. It's not that small.
Yeah, down the road MXL-SIMO may be large enough to attract more potential buyers.
But I thought SIMO might be appealing due to its unique product line. MXL + SIMO looks to me to be sort of a random mess in terms of products segments (flash controllers, wifi, some mixed signal stuff, other stuff). |
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| From: Elroy | 7/19/2022 9:09:54 PM | | | | | | Supply Chain Overstocked, NAND Flash 3Q22 Price Drop to Broaden to 8~13%, Says TrendForce
According to TrendForce, market oversupply intensified in 2Q22 due to lagging demand and continued NAND Flash output and process advancement. The market consensus is a disappointing 2H22 peak season for consumer electronics including notebooks, TVs, and smartphones. Material inventory levels continue to rise and has become a risk to the supply chain. Due to slow destocking among distributors and a conservative stocking approach among clients, inventory problems have bubbled over upstream onto the supply side and sellers are under increased pressure to sell. TrendForce estimates, due to the rapid deterioration of the balance between supply and demand, the drop in NAND Flash pricing will expand to 8~13% in 3Q22, and this decline may continue into 4Q22.
In terms of Client SSD, due to weak consumer demand, various PC brands have significantly reduced their purchase order volume in 3Q22 in order to digest 1H22 SSD inventory. As suppliers shift focus to 176-layer client SSD, 176-layer QLC SSDs have begun to ship, and YMTC looks to expand shipment of notebook client SSDs in 2H22, price competition has become increasingly fierce, forcing manufacturers to increase price concessions to incentivize clients to up order volume. Thus, the decline in client SSD pricing is expected to expand to 8~13% in 3Q22.
In terms of Enterprise SSD, purchasing momentum in 2H22 will be inferior to 1H22, mainly due to the impact of the overall economic recession on server brands’ shipments of whole devices. Corporate order volume continues to decline, simultaneously affecting the purchasing momentum of enterprise SSDs in 3Q22. Secondly, orders from cloud service providers in China were weak in 3Q22 and demand driven by shipments of next-generation server platforms failed to meet expectations. In order to boost the growth of enterprise SSD revenue, suppliers expect to stimulate sales through more generous price negotiations. However, buyers are currently unwilling to expand procurement, so enterprise SSD price declines are estimated to broaden to 5~10% in 3Q22.
In terms of eMMC, weak demand for major applications such as chromebooks and TVs has induced buyers to carefully control inventory, so it is hard to see any signs of life in eMMC pricing. Although manufacturers’ long-term plans involve a continued reduction in the supply of 2D eMMC products to keep prices stable. End customers and module customers are focused on destocking due to the recent overall downward trend in demand. Eventually, oversupply in the eMMC market will become more serious than expected. Therefore, the price of eMMC in 3Q22 will drop by another 8-13%.
In terms of UFS, since China’s 618 e-commerce promotions have not induced recovery in smartphone demand, destocking of whole devices has become a top priority for Chinese OEMs. Sluggish demand has not only impacted Chinese smartphone brands. Even Samsung, which is mainly focused on markets excluding China, has warned that the demand outlook is clouded, leading to a sustained weakening of the UFS market in 2H22. Originally, sellers held the view that price concessions would not stimulate demand and were unwilling to negotiate pricing. With rising inventory pressure, reducing prices to capture sales is inevitable. The decline in UFS pricing is estimated to expand to 8~13% in 3Q22.
In terms of NAND Flash wafers, a rebound in demand during peak season and the lifting of lockdowns in China were originally forecast to refresh the market. However, demand continues to deteriorate and inventory at module factories and end customers remains high, resulting in a sustained decline in wafer quotations. At the same time, manufacturers continue to expand the supply of wafers and process optimization continued to improve, resulting in magnified inventory pressure at the factory end. The decline in NAND Flash wafer pricing is estimated to expand to 15~20% in 3Q22. |
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| To: Elroy who wrote (2572) | 7/20/2022 3:38:18 PM | | From: Rarebird | | | | I took a very hard look at SIMO today in my own way and discovered that the stock is a strong buy technically and fundamentally. This stock is cheap. Technically, the stock has bottomed intermediate term and is headed to the $120-$130 area short term in my estimation (3 months).
Elroy, I know you are not a chart guy, but please take a look at this:
schrts.co
I am looking at a cup and handle on the daily, which is a very powerful bullish set up.
I also love what I am seeing on the weekly:
schrts.co
Fundamentally speaking, I like SIMO's ROE very much. I try to pick stocks long whose ROE is at least double the PE. And SIMO more than qualifies here.
Oh, yes, I took a long position in SIMO today.
I have a history of doing very well with Hong Kong stocks. Last Hong Kong stock I held for a while was FUTU, which provided a five bagger in 3 months last year. |
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