I don't think those are real concerns for SIMO in the coming year.
In leading edge gen4 client SSD PC controllers SIMO has said that they expect to exit 2022 with 50% market share, a huge gain over their previous ~25% share of all PC SSD controllers. Eventually as PCs move up technologically, SIMO should head toward 50% share of all PCs. This ia a necessary and huge space.
In eMMC controllers SIMO has said that Samsung is exiting the market, leaving SIMO heading toward becoming a monopoly in this space.
UFS controllers is the most competitive space, and it's is hard to tell what is going on there, although SIMO is gaining share and growing it's sales (as the area is relatively new to them, so they start from zero), but SIMO is not #1 in this space, no.
Then you add in anywhere NAND memory is used (autos, IoT, AI, you name it), and you've got growth that should naturally flow mainly to the high volume unit maker.
Then consider the high end - enterprise SSD controllers, cloud, expensive 75% gross margin chips, a space where SIMO is entering this year, and SIMO requires much lower gross margin that the established players (MRVL, MCHP, AVGO) that it is very easy to see SIMO chips away at the lower end of the enterprise space, grabbing more and more of the cost sensitive sales each year, forcing the higher end guys to either CUT PRICE to stay competitive (they hate that) or lose share, that provides the future HIGH GROWTH story as SIMO's enterprise sales today are miniscule.
THAT is the SIMO story. PCs and cell phones and electronic gadgets which use NAND memory are going to sell. Units are flat at worst and modestly up on average in each category. And the enterprise flash controller space is huge and SIMO is starting from close to zero.
Competition in client flash controllers is very low, and the big boys (Samsung mainly) are each year exiting the lower end segments, which SIMO takes up very profitably. Those low end segments have MASSIVE volumes. SIMO as the high volume low cost producer can make a lot of money in the segments, while no one else has SIMO's economies of scale and therefore cannot make profit in the low end and therefore others don't enter and compete in the low end and therefore repeat - SIMO makes all the money, and grows.
The "issues" of this year (China lockdown, Russia-Ukraine war, inflation) are speedbumps, the big picture SIMO story (as far as I can tell) is great. But.....the market doesn't agree with me, SIMO gets a HUGE valuation discount, and I really don't know why.
It's as if the market thinks AVGO (or some similar company) may release a full line of competing client flash controllers in 2023, and take away half of SIMO's sales. But semis don't try to gain share in the low end, they go after the high end. So why doesn't SIMO get a premium valuation as it's a growing cash machine with minimal competition? I don't know. |
