Today I will focus on the important companies in the semiconductor industry. We are using the book, Understanding Semiconductors: A Technical Guide For Non-Technical People” by Corey Richard to guide our studies. This is a great book about semiconductors, and I highly recommend it. We will go through Chapter 9 today. In this chapter he discussed the connection between companies and countries in the semiconductor industry.
The numbers below were provided by Seeking Alpha and Morningstar. Most numbers are rounded.
Disclaimer: The videos below do not belong to us. The creators are mentioned in each video.
Taiwan Semiconductor Manufacturing Company (TSMC)
Current Enterprise Value: $426B
2022 Revenue: $73.6B
7 Yr. Gross Margin: 51%
7 Yr. Operating Margin: 41%
7 Yr. Net Margin: 37%
7 Yr. Asset Turnover: 0.51
7 Yr. Total Return: 266%
7 Yr. S&P 500 Total Return: 130%
TSMC Notes:
Manufacture 92% of most advanced chips in the world.
Company has 54% of overall chip market share.
Company can raise prices without much pushback from customers. Their customers understand that it is expensive for TSMC to make the leading-edge chips.
Gross and operating margins are twice as high as their closest pure play fab competitors.
Most of their competitors gave up on producing leading-edge chips because it became too expensive.
Management has a target Gross profit margin of 53%.
1/3 of their revenues come from smartphone market.
Intel
Current Enterprise Value: $181B
2022 Revenue: $63B
7 Yr. Gross Margin: 57%
7 Yr. Operating Margin: 26%
7 Yr. Net Margin: 21%
7 Yr. Asset Turnover: 0.51x
7 Yr. Total Return: 20.95%
7 Yr. S&P 500 Total Return: 130%
Intel Notes:
Company had problems developing their leading-edge chips for 10 years. They had delays with 14nm, 10nm, and 7nm.
While Intel was struggling to develop leading-edge chips, AMD was passing them by with the help of TSMC.
Intel shares X86 architecture rights with AMD. If either company is bought, they relinquish their right to ownership of the X86 architecture.
Intel is still the market leader in data center and PC CPU.
Company sold NAND (non-volatile memory) business to SK Hynix in 2020 for $9B.
Company will start reporting their Programmable Solutions Group (PSG) financials separately in 2024. They will spin off the segment in 2-3 years. This group is responsible for their Field Programmable Gate Array (FPGA) technology. This segment includes the Altera business they bought in 2015 for $16.7B.
Revenue for their PSG was $2.9M over the last twelve months.
Two challenges Intel face is their customers are developing their own ARM based CPU's, and some software can now be run in the cloud without the need to be on X86. As Intel advances, their customers are trying to find ways to be less reliant on them. NVIDIA is facing the same issue.
NVIDIA
Current Enterprise Value: $1.15T
2022 Revenue: $26.97B
7 Yr. Gross Margin: 61%
7 Yr. Operating Margin: 29%
7 Yr. Net Margin: 27%
7 Yr. Asset Turnover: 0.79x
7 Yr. Total Return: 2,819%
7 Yr. S&P 500 Total Return: 130%
NVIDIA Notes:
GPU is ~80% of their revenue.
Company was fabless from the beginning unlike AMD.
Bought network company Mellanox for $7B in 2020.
Customers are becoming competitors because they don't want to rely too much on NVIDIA.
AMD is their closest GPU competitor. Intel is not a threat right now.
CONCLUSION
Next week we will go over the last chapter of "Understanding Semiconductors: A Technical Guide For Non-Technical People” by Corey Richard.
Stay strong, stay blessed, and God willing, I will see you next week.
“Trust in the Lord forever, for the Lord God is an everlasting rock.”
Isaiah 26:4 ESV
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