| | | SIMO, sells its NAND controllers to gadget/chip producers -> Gadget/Chip producer's revenue under pressure through tariffs -> less demand/sales for SIMO
SIMO sells it's NAND controllers to cell phone and PC/Notebook makers, or to NAND memory makers makers and module that are packaging the controller with flash memory, and then selling that module to cell phone or PC/Notebook makers.
The tariffs only kick in if the end device is being built outside the USA (as most are) and then imported into the USA (as only a few are).
We can assume almost all devices that use SIMO controllers are built outside the USA.
For cell phones only 7% of the global Android market is consumed in the USA, so if SIMO's Android business matches the global market only 7% of SIMO's Android business will experience tariffs. My hunch is SIMO's Android business is more non-USA than the general Android market, so lets guess 4% of SIMO's Android business involves devices imported into the USA, and currently required to pay a 10% tariff. Ok, that's perhaps 1% of sales.
For notebooks and PCs, it's harder to tell how many PCs using a SIMO controller are imported into the USA. The US consumes 28% of PCs and notebooks globally, so perhaps 28% of SIMO's PC SSD controllers will be subject to the current 10% tariff. That's a fairly large number, perhaps 15% of SIMO's total sales.
I think it's safe to say in total less than 20% of SIMO's business touches the USA, and it may be less than 15%. Those sales may slow, yes. But 15% of sales slowing is nothing close to 100% of sales slowing. It may even be offset by the anticipated growth throughout the year that SIMO is expecting such that the total sales still grow strongly in 2025, but perhaps not all the way up to $250m in Q4 2025 as previously anticipated. Ok, that's fine with me.
We'll see. It will be interesting to see what happens with SIMO's share price in the first half of 2025. They may even have revenues turn out BETTER than expected as cell phone and PC makers are expediting orders right now hoping to get as much inventory into the USA before the expected higher electronics tariffs arrive. So we may have a deteriorating business environment (due to tariffs and sentiment) but increasing actual sales. If sales actually ramp in the near term it means there's a big inventory glut and sales decline in the future, but by then perhaps the tariff mood has improved.
Here's what TSMC just said - "we understand there are uncertainties and risks from the potential impact of tariff policies, however, we have not seen any change from our customers behaviour we have so far."
Intersting times. |
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