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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: The Ox who wrote (20103)	10/6/2017 3:03:33 AM
From: Elroy	Respond to of 33421

Not sure it's the best pick in the sector going forward SIMO is sort of the only pick in its "sector", it's the only semiconductor maker that sells exclusively to the NAND makers and customers of NAND makers. MRVL is probably the closest comp to SIMO since MRVL also sells SSD controllers, but MRVL has a much larger disk drive semiconductor business. MRVL once announced their own cell phone eMMC NAND controllers, and I don't think they ever sold one. After MRVL there is a sort of similar Taiwanese company called Phison that tries to make SSD controllers, sells some of them to Toshiba, but not much. Most of Phison's business is building stuff (like USB sticks) with NAND. There are no other public companies that make NAND controllers and sell them to other companies that I know of. Competition in SIMO's sector is pretty teeny tiny, which is weird considering how many hundreds of millions of NAND-based devices (cell phones, PCs, tablets, misc other) get sold each year. There are actually BILLIONS of NAND-based stuff sold each year, and three companies make NAND controllers for others to buy? Sort of weird. The NAND makers themselves (MU, SK Hynix, Samsung, WDC-Sandisk) aren't really in the same business as SIMO, they are either completely integrated and make their own controllers (Samsung) or they make a few of their own high end controllers and buy the majority (the mas market price sensitive stuff) from SIMO and MRVL. If NAND production is going to expand, it's pretty hard for SIMO to do poorly, unless something unknown has dramatically changed and we don't know about it yet. More NAND = more devices using NAND = more need for a controller, and there aren't that many NAND controller makers (SIMO and MRVL and allegedly Phison, why so few?). If 3D NAND production is going to ramp, and NAND prices are going to fall, a great pair trade is long SIMO short any NAND maker (especially WDC). Look at SIMO and WDC beginning from summer 2016. SIMO had just had it's massive runup from a few beat and raise quarters and NAND was cheap, and Sandisk-WDC was in the toilet because NAND prices were so low. Since then this transition from 2D to 3D NAND began, NAND supply has been constrained, NAND prices have risen, and WDC-Sandisk stock has done great while SIMO has languished. Well.......the tide is going to turn in the other direction pretty soon, and turn into a tsunami (I guess the tide went out last year, and will come in this year) in about a year from now. 3D NAND ramp ramp ramp production is the story of NAND from here for the next few years. Did I already mention China wants to make 3D NAND? Who benefits from cheap NAND? SIMO. Who hurts the most from cheap NAND? WDC, both because cheaper NAND prices means lower NAND gross margins for Sandisk, and also NAND SSDs will more and more displaces disk drives in PCs. Who is the #1 maker of disk drives in PCs? WDC. The tsunami is coming, the question is just when. Forward looking markets seem to be positioning themselves for the NAND production increase tsunami recently. SIMO going up a bit, WDC coming down a bit. It's just a trickle now, what you think will happen next summer when all the NAND makers are cranking out as much 3D NAND as feasible and the Chinese enter the market with actual (cheap) product? Time will tell. Unless something dramatic has changed that we don't know about methinks SIMO is going to crank up the stock price gains pretty soon.... --- But...I can't say for sure that SIMO will outperform Bitcoin over the next 12 months. Bitcoin is a growth monster!