I remember couple month ago I argued about SIMO's bad fundamentals(RO-IC/E/A, margins and other stuff), now when I'm taking a look... doesn't it simply due to compounded R&D expenses?
SIMO's operating expenses have increased significantly compared to a few years ago, that's right. They say one reason is they are now developing 6nm controllers, whereas historically the controllers were made between 28nm and 12nm. Last year they spent a ton and developed three new chips, which they have been selling since H2 last year, and are expected to produce big sales starting in Q2 this year. Yes, reading your post, I think you have the story spot on.
SIMO is generally two years ahead of the mass market with new products, design slots are won a year ahead of production, and product ramps from start to "high volume" takes 2-4 quarters. So they've got good forward visibility, as long as their customers do well in the market.
They say they'll be close to $250m sales in Q4, and that 2025 will have growth each quarter after Q1. If they come close to that level it means 2026 should be record sales for them. I think the price will be closer to $80 than $50 as long as things play out the way they've guided.
And they've got an interesting enterprise controller chip which may become interesting in 2026. 6 signed customers so far, and once that becomes meaningful it's all new sales for them (new segment).
I like the SIMO story, other than the Taiwan headquarters. It's a juicey acquisition target. |
