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Technology Stocks : Semi Equipment Analysis
SOXX 289.38-3.4%Nov 13 4:00 PM EST
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To: Return to Sender who wrote (85876)11/9/2020 3:11:09 AM
From: Elroy1 Recommendation

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The major (almost only) concern about SIMO in the mid to long term is competition from internal controller groups at NAND makers.

There have been indicators recently in both directions.

Positive developments for outsourcing client SSD controllers are that SIMO had four NAND makers as customers for their gen3 PCIe NVME controllers. For the next generation gen four version (which will begin sales next year, and become mass market in 2022 and 2023) SIMO has the same four customers and also Korean NAND maker which has given SIMO more than one design win for this product. That means either Samsung or SK Hynix.
Positive developments for outsourcing for UFS controllers are that SIMO currently has Micron as a customer, and will add SK Hynix as a customer in summer 2021. Both programs are described as "multi year" in nature.

Negative developments for client SSD controllers are the SK Hynix plans to buy the Intel SSD division around the end of 2021 or early 2022. Intel uses SIMO for 100% of their client SSD controllers. SK recently released a gen3 PCIe NVME client SSD with an internal SK controller. After SK acquires the Intel SSD dividiosn SK may internalize the controller which the division historically bought from SIMO. Or, they may not. Who knows?

Micron said in their recent conference call that in the coming quarters they have client SSD and mobile product coming out which use internal Micron controllers. Micron has always had some client SSDs which use Micron controllers, and other client SSDs which use merchant controller. But.....mobile products? Perhaps that means Micron is making it's own internal UFS controller (which means it wouldn't continue to purchase them from SIMO). How that jives with Micron having just released a mobile module which uses a SIMO UFS 3.1 controller is unclear.

Anyways, that's the story. SIMO has a good shot to have record revenues in 2021. So the low PE and price to sales is too cheap. It's a beautiful acquisition target for a larger semiconductor company even if sales never grow. If sales do actually grow, the valuation makes little sense.
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