Thesis Semiconductor Market Business Plan Summary Examples
To a degree, semiconductor stocks had become the victims of their own success.An extended upcycle where semiconductor stocks outperformed increased the potential downside risk when industry profit margins approached cyclical peaks—traditionally a point where market participants reduce their exposure to the group. Accordingly, economic uncertainty stemming from escalating trade tensions between the U. and China appeared even more threatening against a backdrop of peaking auto sales and declining prices for memory chips.NXP Semiconductors, for example, called for its automotive revenue to increase by 7% to 10% annually through 2021.Although valuations and sentiment indicate otherwise, the wave of stock buybacks by prominent semiconductor companies is unusual in the tech sector and suggests that management teams have a degree of confidence in the near-term outlook.The auto market arguably offers the most compelling growth opportunity on the consumer side, in our view, even if U. Semiconductors are at the heart of all these innovations, from the memory chips that are essential to training advanced neural networks on massive data sets to the analog semiconductors that process real-world phenomena into digital signals and enable local devices to communicate with the cloud.As chips proliferate in more and more devices to enable data collection and monetization, the semiconductor industry benefits from volume growth and the improved profit margins that come from dealing with higher-quality customers than PC manufacturers.
Moore’s law has encountered resistance because of technological limitations and the increasing complexity of the manufacturing process.On the demand side, the semiconductor industry finds itself at the nexus of a mutually reinforcing feedback loop where low-cost data storage and advances in artificial intelligence unlock opportunities to exploit big data.Nowhere is this more evident than in the massive investments that leading Internet platforms have made to build out their data centers and artificial intelligence capabilities as part of the ongoing push to monetize their rich troves of information on users and their behaviors.Improving competitive dynamics should lead to more rational behavior on the supply side, helping to mute cyclical price fluctuations and support profit margins.The memory business is furthest along in this regard, with three players dominating this commoditized market.This arms race extends beyond the leading online platforms to the offline world, where the emergence of the Internet of things creates new opportunities in industrial and consumer end markets.For example, in the utilities sector, machine learning promises to improve efficiency by balancing electricity supply and demand in a more dynamic fashion and identifying potential maintenance issues before they lead to system outages. The opportunity set reflects the migration of in-dash infotainment consoles and advanced driver-assistance systems from luxury vehicles to mid-market cars, as well as the electrification of additional automobile subsystems and the push for autonomous driving.This rule of thumb holds that the number of transistors on a chip should double every two years, causing costs to the end consumer to decline.Lam Research findings, embraced by memory supplier Micron Technology at its May 2018 analyst and investor day, indicated that the cost of expanding DRAM supply by 20% had increased by three to four times over the previous five years.Important Information This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.The views contained herein are those of the authors as of December 2018 and are subject to change without notice; these views may differ from those of other T. Fact Set—Copyright © 2018 Fact Set Research Systems Inc. This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services.