| | | I looked at what SIMO did in the "Covid panic" of 2020.
The situations then and today are fairly similar for SIMO.
2020
SIMO had just reported Q4 2019, said that they've got sequentially downward Q1 2020 guidance with expectations for strong growth in 2020 after they get over the Q1 2020 sales dip.
Then Covid hit, the market panicked, and SIMO's share price dropped with the market.
SIMO's share price bottomed inter-day at about $27 in the worst market panic day. Seven days earlier it was $34 (or higher). Seven days later it was $36 or higher. So....I think the message here is the reasonable bottom for SIMO in 2020 was $35ish, if you ignore/exclude 14 days of "market panic". The absolute inter-day price bottom was $27, that was when the entire market was tanking due to this new thing called Covid.
In Q4 2019 SIMO did $153m in sales. In Q1 2020 SIMO did $131m in sales (in line with their guidance), and then said "We continue to expect sequential sales growth in the second quarter and remain optimistic about the rest of the year".
2025
In Q4 2024 SIMO did $191m in sales. In Q1 2025 they guided to $160m, but will probably beat that due to all the "pull in" from customers trying to beat the tariff deadlines (that's been the story for Q1). They said on the last earnings release "Consumer demand remains weak in the first half of 2025 and is proving more challenging than we initially anticipated; however, we expect a strong rebound in the second half of this year driven from new product introductions and new project wins with our OEM customers, reaching close to a run-rate of $1 billion in annual revenue in 4Q25."
So.....SIMO's current fundamental environment (Q1 sequential sales decline followed by strong growth for the rest of the year) is nearly identical to their situation in 2020.
Sales (Q4 and Q1) now are about 30% higher than they were in 2020. So, perhaps it's reasonable that if the market declines SIMO's absolute bottom may be 30% higher than the 2020 bottom of $27 (in other words, $35 today), and SIMO's stablized bottom may be 30% higher than the 2020 stabilized bottom of $35 (in other words $45).
My takeaway is that SIMO (like many semiconductor stocks) is a screaming buy now, and especially if the market gets another dip in the coming weeks, it may be a golden opportunity. Of course, if the market dips meaningfully there are loads of opportunities out there!
Why is SIMO a good place to be in the US - China trade war. Well, for semiconductors (and all stocks), you want to avoid companies that have exports and imports going between the USA and China.
SIMO's Android business mobile controller (about 30% of sales) probably has only abou 3% of sales going between the USA and China, and it may actually be zero.
SIMO sells 7% of it's product directly into the USA. If these are semiconductors, they're exempty. If these are Ferri modules or some other module, and they ship out of China, they will be hit with a 145% tariff, but if they come out of anywhere else, they only get a 10% tariff, and I would guess perhaps these come out of Taiwan. Who knows? If they come out of China today, I'll bet they start coming out of China pretty soon!
SIMO's PC SSD business (about 60%-65% of sales) is the issue. If these PCs are made in China, contain a SIMO controller, and ship to the USA, they are vanishing. What percent of SIMO's PC SSD business is in this situation? Hard to say, but I've seen that the USA buys about 27% of the world's PCs, and 38% of the PCs that ship to the USA are made in China. So......(some rough math here) if we assume SIMO's sales match world patterns exactly, then 27% of SIMO's PC SSDs are heading toward the USA, and 38% of those are made in China, we get about ~10% of SIMO's PC SSD business is made in China bound for the USA and a 145% tariff. And if the PC SSD business is 65% of SIMO's total sales, it means 6.5% of SIMO's total sales has to either vanish or find a way to get shipped out of a country other than China.
If SIMO does $170m total sales in Q1 2025, about $10m of their sales may be exposed to the US - China trade war tariffs.
That's not bad!
How about "How will the trade war affect SIMO specifically"? Well, lets see.
I think we can expect Q1 2025 to come in well ahead of expectations because I think makers pulled in Q2 orders to try to beat the arrival of tariffs. That will reverse and reduce Q2 sales, but there was already some growth expected in Q2 so this may be a wash. In China, if the government pushes the citizens to avoid buying US's Apple iPhones, that may push them into China-made brands of Android phones like Oppo and Vivo and Huawei. I think SIMO is inside these Chinese branded phones, so this may actually BOOST (believe it or not) SIMO's mobile controller business.
NAND prices may drop if production of built in China exported to the USA PCs (and cell phones) drops as expected. Where's all that NAND going to go? Module makers love cheap NAND, and that's a space where SIMO is dominant. Apple will hurt be the biggest the longer the China - USA spat continues, and that A LOT of spare NAND, so SIMO's Android sales (not exposed to the USA) may strengthen while SIMO's module maker customers scoop up cheap NAND and then buy SIMO controllers for their modules.
I think SIMO's main issue in this war is the global recession issue, the specific company level stuff should hurt SIMO less than many semiconductor companies since (I think) SIMO doesn't touch the US much, and thus avoids tariffs.
I think on a fundamental basis, SIMO is a screaming buy. I don't know for sure, but I think PCs and cell phones will A) continue to sell reasonably well in a global recession, and B) are easier to move production around the world to avoid US - China tariffs. |
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