Semiconductors
PRE RESULTS COMMENT
2Q Earnings Preview - "Meet and Mixed"
■
A Mostly Meet and Mixed Earnings Season. We believe most
semiconductor companies will meet 2Q estimates but expect somewhat
mixed guidance for 3Q with a neutral to positive bias on PC and industrial
analog companies and neutral to negative bias on cell phone and consumer
analog companies. Current aggregate consensus for our universe of stocks
is for q/q revenue growth of +0.1% and +6.4% for 2Q and 3Q respectively
versus normal seasonality of +0.5% and +6.2%. While backlog and order
trends in general support 3Q estimates, the filter of a more precarious macro
backdrop could lead to slightly more conservative guidance from
management teams. For 2008 we have semi earnings growth of 10% (exmemory)
versus the current estimate for the SPX of 6% - a 4 percentage
point positive gap for semis.
■
Thoughts by Sectors. Specifically for PC Semis, we believe PC units are
largely tracking to seasonal norms – with some notebook push-out from 2Q
to 3Q due to Montevina delays capping some upside, offset by robust server
demand and Atom driving better than expected low-end PC demand. In
analog we favor companies with higher industrial exposure over companies
with consumer and communications exposure. Memory continues to be
challenging with oversupply in both DRAM and NAND likely to keep
fundamentals weak into 2H08 – we believe this situation is likely to change
only with further supply rationalization and new drivers for demand (e.g.
SSDs in NAND).
■
Semi Cycle Data Points – Units, ASPs, Inventories, Capex. YTD (thru
May) semi (ex-memory) units and ASPs have continued to show strength,
growing 7.2% y/y and 4.8% y/y respectively, generating YTD revenue
growth of 12.3% vs. 5.9% for 2007. Assuming normal seasonal trends, 2008
y/y unit, ASP and revenue growth should be +4.9%, +3.5% and +8.6%
respectively. While 1Q08 semi inventories were in-line on a dollars basis
(+3.2% q/q vs. +3.5% seasonal) they were slightly worse on a days basis
(+8.7 days q/q vs. +3.8 days seasonal) – we expect 2Q semiconductor
inventories to trend in-line with normal seasonal trends on both a days (flat
days q/q) and dollars (+4% q/q) basis. We also expect capacity utilization to
continue to remain high (1Q08: 90.5%) and capex spending (ex-memory) to
continue to remain rational and below historic averages (12.1% of 2008E rev
vs. 2003-07 average of 15.0%), we also expect continued downward bias to
memory capex. In combination – units, ASPs, inventories, capacity
utilization and capex should continue to support stock valuations in 2H08.

SOX bottoming but still volatile owing to the macro. After increasing over 25% off
the March 2008 bottom, the SOX is down 20% from mid-2Q highs – YTD the SOX is
down 15.6% versus declines of 15.6% and 14.7% for SPX and Russell 3000
respectively. Given relatively strong semi cycle data points, we believe that the 2008
lows in the SOX might already have been established and while we expect continued
volatility through earnings, we believe investors should add to positions on any
weakness. This view is based upon: (1) extremely healthy ex-memory supply
conditions relative to unit growth, ASPs, capex and inventory (2) estimate reductions
in semis which are further along than the overall market, (3) the likelihood of improving
seasonal 2H patterns (4) margin profiles which have improved structurally and appear
cyclically depressed, and (5) valuation, as semi stocks are trading at 30-40% discount
to five-year valuation averages. Implied FCF of 5% rivals the SPX of 2.6%.
■ Stock Ideas. We maintain our thesis of (1) PCs over cell phones (2) industrial analog
over consumer analog and (3) NAND over DRAM. INTC remains our top large cap
pick in semiconductors – while Montevina delays capped some upside in the June
quarter, server demand continues to be robust, the introduction of Atom has spurred
better than expected demand at the low-end, 45nm production ramp is well underway
and a strong product line-up is in place. We believe at current valuations there is $1 to
$2 dollars of downside and $6 to $8 of upside. ONNN is our favorite mid/small cap
idea as we believe investors are underestimating cost synergy opportunities, margin
leverage, and potential revenue synergies post the close of the AMI acquisition; we
believe upside to both estimates and multiples is achievable. In addition we continue
to favor analog names leveraged to the industrial vertical as we believe lean inventory
levels should provide a buffer to macro- economic concerns – MCHP and LLTC. Lastly
at current valuations we are become more positive on AMD and less negative on TXN.
■ Foundry and Back-end Stocks. We also integrate coverage of the Asian foundries
and back-end from Randy Abrams, Keng Hock Lim and Pauline Chen. Key
takeaways: 1) 2Q and 3Q tracking to expectations and to more rational growth than
the premature street case for over-heating, 2) 4Q/1Q estimates conservatively reflect
year-end adjustments, and 3) currency and gold less of a headwind in 3Q. Against this
backdrop, TSMC remains a relative outperformer due to tightly managed capacity,
strong cash flows even in a weaker economy and positive drivers in 2009 (processors,
lower depreciation, firmer pricing). Our back-end picks are ASE and SPIL, which retain
8% FCF margins, supply control and better margins as the NT$ and gold pricing
stabilize. ASE and SPIL are both now trading near 2 year lows just under 2x P/B.

Table of contents
Earnings Calendar 5
2Q08 Semi Earnings Preview 6
June Quarter Results Outlook 6
September Quarter Guidance Outlook 8
General Expectations for 2008 10
Macro Semiconductor Outlook 12
Supply Chain Dynamics Healthy 12
Semiconductor Inventory Analysis 13
Asian Semiconductor Outlook – Near-term intact, but 4Q/1Q pullback likely 13
Individual Company Snapshots 21
Company Snapshot Summary 21
Advanced Micro Devices, Inc. (AMD, $4.96, NEUTRAL [V], TP $7.00) 21
ANADIGICS, Inc. (ANAD, $9.40, NEUTRAL [V], TP $10.50) 24
Cypress Semiconductor Corp. (CY, $24.10, NEUTRAL, TP $31.00) 26
Entropic Communications Inc. (ENTR, $4.35, OUTPERFORM [V], TP $10.00) 28
Fairchild Semiconductor (FCS, $11.01, UNDERPERFORM, TP $12.00) 30
Intel Corp. (INTC, $20.62, OUTPERFORM [V], TP $30.00) 32
Intersil Corp. (ISIL, $23.33, NEUTRAL, TP $25.00) 35
Linear Technology Corp. (LLTC, $30.95, NEUTRAL, TP $35.00) 37
Maxim Integrated Products (MXIM, $18.90, OUTPERFORM, TP $23.00) 39
Mellanox Technologies Ltd. (MLNX, $13.78, NEUTRAL [V], TP $17.00) 41
Micrel, Inc. (MCRL, $9.02, UNDERPERFORM [V], TP $7.50) 43
Microchip Technology Inc. (MCHP, $29.23, OUTPERFORM [V], TP $39.00) 45
ON Semiconductor Corp. (ONNN, $8.59, OUTPERFORM, TP $13.00) 47
Qimonda AG (QI, $2.38, OUTPERFORM, TP $6.00) 49
Spansion Inc. (SPSN, $2.03, OUTPERFORM [V], TP $5.00) 51
Texas Instruments Inc. (TXN, $27.30, NEUTRAL, TP $30.00) 53
Foundry and Back-end Snapshots 56
Advanced Semi. Eng. (2311.TW, NT$25.6, OUTPERFORM, TP NT$37.0) 56
Chartered Semi. Manuf. (CSMF.SI, S$0.77, NEUTRAL, TP S$1.02) 59
Siliconware Precision (2325.TW, NT$41.2, OUTPERFORM, TP NT$54.0) 62
SMIC (0981.HK, HK$0.42, NEUTAL [V], TP HK$0.75) 65
TSMC (2330.TW, NT$59.5, OUTPERFORM, NT$77.0) 68
UMC (2303.TW, NT$15.0, NEUTRAL, TP NT$22.0) 71
Vanguard Int’l Semi. (5347.TWO, Nt$20.4, OUTPERFORM, TP NT$20.0) 74
Semiconductor Relative Valuation 77

[此贴子已经被作者于2008-7-21 0:27:31编辑过]