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Chip stocks are outperforming (SOXX +1.1%) after Avago (AVGO +5.1%) posted an FQ1 beat and strong margin numbers (albeit while guiding light, as many expected), and STMicroelectronics (STM +3.9%) exec Paul Grimme states his company's European sales are stabilizing, with Germany leading the way.
Notable winners: AMBA +5.4%. AMCC +5.2%. CRUS +3.3%. SWKS +3%. QUIK +4.1%. INVN +2.7%. RFMD +3.5%. TQNT +3%. SIMO +2.7%. CAVM +3.6%. Nearly all of the aforementioned names have strong mobile and/or telecom equipment exposure.
RBC has hiked its Avago PT to $66 from $64, and says the chipmaker remains its "top play on China and global LTE deployments." With LSI in tow, the firm thinks FY15 (ends Oct. '15) EPS will top $5.
Morgan Stanley ($68 PT) is confident Avago can raise LSI's op. margin to 30% from 17% over the next few years, much as the company has doubled its own op. margin to 30% post-LBO.
Microchip (MCHP) +4.5% after raising its FQ1 (ends June 30) guidance. The microcontroller vendor now expects 4%-7% Q/Q sales growth and EPS of $0.52-$0.56; that's better than prior guidance of 2%-6% growth and EPS of $0.50-$0.54, and largely above a consensus of $447.7M and $0.52. Microchip, often seen as a bellwether for chip stocks (SOXX, SMH), says it has "continued to see a very strong bookings and business environment," has "received excellent visibility" from customers, and is returning employees to work faster than expected to keep inventories from falling too low. Microchip's guidance hike comes after the SIA estimated chip sales fell 10% M/M in March, better than a historical drop of 15.3%.
Samsung Electronics (SSNLF.PK) says its Q1 profit rose 42% to a record high on strong smartphone sales. Net profit rose to a record KRW7.15T ($6.4B), up from KRW5.05T a year earlier. Operating profit rose 54% to KRW8.8T from KRW5.7T. Sales rose 16.8% to KRW52.9T from KRW45.3T, coming in in line with the company's guidance of KRW51T to KRW53T. The results stand in stark contrast those of Apple (AAPL), which earlier this week reported its first profit drop in a decade and forecast margins to decline in the current quarter ending in June.
Are wireless chip stocks decoupling from Apple? Even with Apple off slightly as bleak June quarter guidance outweighs fresh capital returns, iPhone/iPad combo chip supplier Broadcom (BRCM +6.6%) is surging thanks to a Q1 beat and strong Q2 guidance, and is helping out some peers - QCOM +1.4%, SWKS +2.6%, INVN +1.8%, SNDK +1%. During its earnings call, Broadcom, which also provides combo chips for many Samsung phones, stated mobile chip sales only fell 1.6% Q/Q in seasonally weak Q1, and forecast sequential growth for the business (Apple-dependent Cirrus Logic sure isn't doing the same). Qualcomm reports after the close.
Telecom chipmakers Cavium (CAVM +7.5%) and PMC-Sierra (PMCS +13.7%) soar after delivering Q4 beats (I, II), and contribute to a decent rally in chip stocks (SOXX +1.9%). Cavium guided on its Q4 call for Q1 revenue of $68.5M-$70.5M and EPS of $0.17-$0.19 vs. a consensus of $69.1M and $0.17. PMC guided on its call for Q1 revenue of $123M-$132M, largely above a $124.7M consensus. The numbers come amidst growing optimism (I, II) about 2013 telecom capex. Peers Broadcom (BRCM +2%), Marvell (MRVL +3.1%), and LSI (LSI +4.7%) are all doing well.
TSMC (TSM +2.5%) has hit levels last seen during the Dot.com bubble after delivering an in-line Q4 report (revenue was already known thanks to monthly reports) and guiding for a smaller Q/Q sales drop for seasonally weak Q1 than was expected. The world's top chip foundry claims 22% of Q4 wafer sales involved its cutting-edge 28nm process - TSMC struggled with 28nm yield issues earlier in 2012. Chip stocks are getting a lift from the report (SOXX +1.4%), and from ASML's guidance.
TSMC (TSM +2.3%) provides some cheer for chip stocks by announcing sales for the seasonally weak month of December were NT$37.1B ($1.28B), -16% M/M but +19% Y/Y. That leads total Q4 sales to amount to NT$131.3B, slightly above guidance of NT$129B-$131B. TSMC's 28nm manufacturing process lead and strong exposure to Apple/Samsung suppliers helped it gain chip foundry share in 2012. (previous)
O2Micro (OIIM) warns it expects Q4 revenue of $16M-$17M, below prior guidance of $17M-$20M and a consensus of $18.6M. The company, no stranger to warnings, blames "broad-based weakness in demand in our end markets, coupled with lower than normal inventories being held in the supply chain." At least a few other chipmakers have similar problems. Shares are likely to fall after rising 8% in regular trading. (PR)
Tessera (TSRA) -6.9% AH after warning it expects Q4 revenue of $50M-$53M, well below the $73.5M estimated by the one analyst who covers the company. Chip packaging IP revenue is expected to fall to $42M-$43M from Q3's $57.9M, and camera module sales to $8M-$10M from Q3's $14.8M. No explanation is given for the warning, which is harsh even in light of the ones recently issued by Altera and Lattice Semi.
It pays for chip companies to have good mobile exposure these days. TSMC (TSM +1.4%), the top foundry for Qualcomm, OmniVision, Broadcom, and other mobile chip names, reported its October sales rose 15% M/M and 32% Y/Y to $1.7B, boosted by growing 28nm chip production. Rival UMC, by comparison, only saw 12% Y/Y growth. Credit Suisse now thinks TSMC should be able to hit the high end of its Q4 revenue guidance range thanks to smartphone-related orders.
Analog chipmakers Diodes (DIOD -7%) and Microsemi (MSCC -5%) are heading south following their Q3 reports (I, II). Though Diodes' Q4 revenue guidance ($160M-$167M vs. $164M consensus) was in-line, its gross margin forecast of 23%-27% is underwhelming, given the midpoint is below Q3's 26.2%. Microsemi is guiding for Q4 revenue of $262M-$268M and EPS of $0.57-$0.60, mostly below a consensus of $268.1M and $0.60. The chip industry remains mired in a slump. (Diodes PR) (Microsemi PR)
Texas Instruments' Q3 call didn't contain much for chip stock investors to be excited about. The analog chip giant claims customer inventories remain lean and demand visibility short; that the industrial and telecom markets are soft; and that September was the weakest month in the quarter. Also, wireless sales are expected to underperform again on a Q/Q basis, a likely sign Amazon is paring back Kindle Fire-related orders after building inventories in Q3. TXN -0.3% AH. (Q3 results: I, II)
Microchip (MCHP) -3% AH after warning it expects to report FQ2 (Sep. quarter) revenue of $407M-$408M, below a consensus of $420.3M. The microcontroller vendor, often seen as a bellwether for broader chip industry demand, blames "macroeconomic and industry conditions" in general. "The overall global economic outlook continues to be poor and is adversely impacting our business as well as the rest of the semiconductor industry." (also: I, II)
Avnet (AVT -9.6%) tumbles to 52-week lows after warning it expects FQ1 (Sep. quarter) revenue of $5.85B and EPS of $0.52-$0.58, below a consensus of $6.06B and $0.83. The company blames the impact of delayed IT projects on its hardware distribution ops, and a "pronounced slowdown" in Americas sales for its chip distribution ops. Given Avenet's bellwether status for chip demand, which is already looking shaky, the warning is likely contributing to early weakness in chip stocks (SOXX -0.9%). Rival Arrow (ARW -6.2%) is also selling off.
Analog/security chipmaker O2Micro (OIIM) warns it expects Q3 revenue of $22M-$23.1M, below prior guidance of $24.1M-$26M and a consensus of $24.8M. The company blames "broad-based weakness in demand in the company's end markets," and claims customers are working through excess inventory. Chalk this up as another negative datapoint for the chip industry. (SIA data) (FBR)
Analog and security chipmaker O2Micro (OIIM) falls 11.6% AH after warning it expects Q2 revenue of $27.9M-$28.5M, below a prior guidance range of $30.3M-$31.8M and a consensus of $31M. In a troubling sign for the chip industry, which has seen evidence of a stalled recovery mount, O2Micro attributes the warning to "broad-based weakness in demand."