Phison is out with their quarterly results today.
They said in the press release they have 20% of the global SSD controller market.
SIMO said (about two years ago) that they are 4x the size of Phison in PC SSDs.
The truth is probably somewhere in between.
I think it would be great to have an outside party give market share information for flash controllers for PC SSD, enterprise SSD, other SSD, UFS and eMMC.
I think Phison and SIMO are the only two meaningful merchant flash controller makers, but knowing those market share numbers would give a much better understanding of SIMO's strength or lack thereof in the flash controller industry.
According to commentary from SIMO over the years (often 2-5 years previous commentary, that is) SIMO has ~30% of the SSD controller market, ~30% of the cell phone UFS market (through their OEM channel Micron), and ~95% of the eMMC controller market.
They are the only meaningful merchant UFS flash controller maker, the rest of this space is controlled by Samsung.
SIMO is the only meaningful eMMC controller maker, in the world (the NAND makers quit this space a few years ago). This space (basically, electronic gadgets other than cell phones/tablets that need some NAND memory) is slowly growing.
If these numbers are anywhere close to accurate, SIMO is well positioned in a necessary semiconductor space which has sstable and modest growth ahead. The problem with SIMO as a stock is it's concentration (flash controllers). Inside of a larger diversified semiconductor company SIMO's revenue stream should earn a higher PE multiple as the flash controller cycle dips and surges can be offset by the same thing in other unrelated segments of the buyer.
Unfortunatley, it seems MXL has dropped out of the "lets buy SIMO" race, and so my thoughts are ....... hold onto SIMO until Q4 2024. By then the current semiconductor low point in the cycle should have turned higher, we (and prospective buyers of SIMO) will have better visibility into what is the ongoing annual sales level of SIMO, and then some bigger semiconductor company can make a bid to acquire SIMO's stable revenues and high free cash flows.
In other words, just wait.
My hunch is SIMO can perhaps get to $900m in sales in 2024. They'll be at $165m in Q3 2023, and a rebound in cell phone sales should push that number up quite a bit higher. They haven't made public commentary for 15 months, but I think they're going to experience share gains in PC SSDs, they've got a rebound on the horizon in cell phone chips, probably a similar rebound in eMMC gadgets, and then there is the long awaited enterprise flash controller which is starting from zero sales, but we have no idea how it's going in terms of design wins.
Yeah, I think getting to $900m in sales in 2024 seems reasonable, and perhaps $1 billion in 2025. By 2025 they should have perhaps $600m cash (if they get $160m from MXL) and no debt.
Just wait. $100 share price by 2025 seems within reason.
What could go wrong? First, Micron could announce an internal UFS controller, and use their own product rather than SIMO's UFS controller. There is no indication of this as of yet, but that's the main concern with SIMO I think. Second, maybe the enterprise controller is getting zero design wins. This would be disappointing and slow growth, but I would imagine they would just redesign and try try again.
And then the nuclear bomb outcome - China invades Taiwan and everyone dies. Yeah, that would be problematic for SIMO, and also the entire semiconductor world.
My hunch is none of those three problems materializes, so we wait. |
