Taiwan Semiconductor 1Q16 Earnings Call Notes

Lora Ho

Expecting 6-7% revenue increase in second quarter

“We expect our business in the second quarter will benefit from continued inventory restocking and the recovery of the delayed shipments from the earthquake. Based on our current business outlook and exchange rate assumptions of US$1 to NT$32.30, we expect second quarter revenue to be between NT$215 billion and NT$218 billion, which represents 6% to 7% sequential increase.”

Mark Liu

May see above seasonal growth in 2Q due to inventory restocking

“Most of our fabless customers may see an above seasonal growth in 2Q 2016, driven by OEMs’ new product launches and inventory restocking in the supply chain. We estimate days of inventory will still be close to seasonal level exiting 2Q 2016”

Reducing estimates of growth for consumer electronics to minus 5%.

“Due to the world macroeconomic uncertainties, we reduced our estimate of 2016 smartphone growth from 8% to 7%, PC from minus 3% to minus 6%, tablet from minus 7% to minus 9%, while maintaining digital consumer electronics growth rate at minus 5%. In spite of the reductions of these growth rates, there are still growth areas in smartphones, broadband network, wireless infrastructures and gaming.”

Smartphone growth will still benefit from 4G deployment in China and possibly GPU in VR applications

“For smartphone growth, momentum comes from China’s 4G Plus deployment, through increases of operator subsidy and the continued 3G to 4G upgrade in emerging markets. These factors will also drive the associated infrastructure growth. Recently, we also see good demand from gaming GPU and game console processors for VR applications.”

We estimate world semiconductor growth to be ~1% in 2016

“For the whole year of 2016, we estimate the growth of world semiconductor to be about 1%.”

Will begin N7 production in 2018

“We have expanded our N7 design ecosystem development to include both mobile and high-performance computing, to enable our customers to deliver their first-to-market products. Our N7 adoption is very strong with customers ranging from mobile GPU, game console, FPGA, network processors and other consumer product applications. We have more than 20 customers in intensive design engagement with us and expect to have 15 customer tape-outs in 2017. The volume production of N7 will start from first half 2018.”

Advancement in a number of applications drive demand for leading edge technologies

“We see continuing technology advancement in baseband, application processors, RF transceivers and wireless connectivity to meet the demand of LTE-advanced specifications. The growth of 4G data rate through carrier aggregation and high-frequency Wi-Fi drives the need for more complex and larger chips. the above drive the demand for our N10 and N7 technologies which will enter production in 2017 to 2019.”

VR/AR, deep learning and AI are the applications that require leading edge tech

“VR/AR, deep learning and artificial intelligence, artificial AI are the emerging applications that will require leading-edge technologies. Consumer-oriented VR/AR products for immersed gaming and immersive video viewing have begun shipment in 1Q this year. The data transfer rate of VR/AR products in interactive design, remote training and multisite conferencing must still be enhanced by 10x from today’s level in order to enable quality viewing experience.”

We do see end market demand increasing

“we do see the customers and even the end market demand is increasing. The inventory restocking is still cautious. And going forward, we’re still watching this month by month to see if demand will change or not. But this is currently our perspective.”

People are still cautious on inventories

“Well what we see, the fourth quarter last year, you remember, is people drastically reduced their inventory. We only see the restocking almost after the Chinese New Year. So that’s where you count the cycles. And what – I don’t see very, very – I don’t see signs of overbuild at this point. People are still cautious. So that’s what we see, the cycle.”

C.C. Wei

There are high, mid and low end smartphones. High end moving to 16nm

“In the smartphone we have high-end smartphone, mid and low-end smartphone. For the high-end smartphone moving to the 16-nanometer, it’s a natural choice and they are moving very fast. Yes. But then the mid and low-end smartphone, that demand increases, so a lot of them adopting TSMC’s 28-nanometer technology.”

Micron FY 2Q16 Earnings Call Notes

Mark Durcan

Automotive remains strong

“In our Embedded business unit, automotive design-in activity remains strong, particularly with 20-nanometer DDR3 and low power DDR4 products. We’re seeing growth with automotive customers in greater Asia and continuing to build upon success with European and U.S manufacturers.”

AUto is an attractive business

“Yes, the automotive business has been pretty strong for us. And its also we view it as an attractive business, because the sockets are pretty sticky, the life times of the products are longer and so from a total return its very positive market for us.”

Clearly the Chinese want to be in memory markets, and now focused on organic growth but that will be tough

“Well, its — I don’t think I’ve got anything really new to say about that. I think we’ve said before that we anticipated that clearly China was interested in being the memory market and that they would look for ways to find partners or to grow organically. We’ve now heard about significant investments in organic growth. But we would remind everyone a yes, that we believe that there are significant technology hurdles and intellectual property requirements in terms of being a major player in the memory space and we think its going to be a challenging road for the — for organic and will take sometime.”

3D X-Point update

“This year we’re short of an enablement mode, and we’re working with a number of different end market segments. Some customers then have significant interest in mobile, some customers in enterprise, or big data applications, I mean mobile for low power — from the low power benefits. Early on as we ramp this technology we expect cannibalization to be low to zero. Over time, as the technology matures and drive to significantly higher volumes. I’d expect some of that volume to come out of what otherwise would have been DRAM and maybe even eventually what otherwise have been other types of Non-Volatile memory. But generally speaking, this is a differentiated technology that will grow the size of the overall memory market at least over the next two, three, four years.”

Focus not on market share, it’s on deploying equivalent advanced tech to competitors

“Our focus isn’t on market share. Our focus is on making sure that we’ve deployed equivalent advanced technology, at least equivalent advanced technology to our competitor, so that we’re not incentivising others to play for market share. And we think that’s just really a prudent thing to do as managers of our business that we should make sure that we’re putting in place efficient manufacturing production capacity and that’s what we’re very, very focused on.”

PC weak but other segments should outstrip supply growth

“Relative to PCs, yes, it continues to be weak. We think maybe down mid single-digits for the year, DRAM content maybe up about 10% for the year. We’re not expecting any big things out of PC demand when we give you our view as the demand growth for the year across all the various segments. But once you get outside of PCs, growing obviously slower than overall market supply for DRAM, and mobile growing maybe right around the market supply for DRAM. You got all these other segments that we think will out script supply growth servers, automotive, etcetera, etcetera. So, generally speaking we do believe that in aggregate things are going to take care of themselves. ”

Micron at Raymond James Conference Notes

Ernie Maddock

DRAM is mature market

“If you think about how we project the industry growing over the course of the next three to four years. DRAM which is the more mature of the two markets it is a little bit slower growing, so less elastic demand. Our belief is that from a – how will supply come into the market, it is predominantly a technology transition story. So we don’t foresee the need for significant wafer additions in the long-term.”

Capex will be in NAND

“If you look at the NAND demand, very highly elastic this transition to 3D we believe is a major breakthrough in the industry in terms of both cost and performance, you get better cost and better performance and we do believe that over the long-term the wafer capacity will be required for NAND. That will be return on capital dependent and then finally emerging memory such as 3D XPoint and others we think will be emerging over this period of time, we a CAGR would have put it off the chart in terms of absolute scale, but these technologies will grow to be reasonable part of the portfolio, but certainly from a significance point of view NAND and DRAM over this timeframe will be the most significant technologies in which the company participates.”

3D X point is split 50/50 between us and Intel

“So the 3D XPoint is coming out of the joint venture, the joint venture and which roughly each participant gets 50% of the output at cost because we have each contributed to the capital and to the R&D. And so really it is about each companies opportunity to leverage that from a market perspective and if Intel is able to say garner higher value from its customers for the products and it includes 3D XPoint in markets and it will be benefitting disproportion but not as a result of any detriment in my comment. ”

The balance sheet should just be a function of what cash is coming in and going out

“The ideal balance sheet, gosh, I know I don’t have it. I know I’m not going to have it for a little bit of time and so it’s frankly not something I spend a lot of time thinking about because at the end of the day it’s a function of what cash is coming in, what cash is going out and believe it or not, folks expect a different answer from the CFO. I’m a big fan of investing capital if in fact the capital generates returns and consistent with the prior answer, I have a belief when I make the decision to do it but it’s a while before I determine that.”

Intel increasing NAND capacity speaks to the importance of memory

“And its, clearly Intel feels quite strongly about the memory space so on one hand it’s a really strong statement about the importance of memory in a way that it hasn’t been important to processor makers before. “

Microchip FY 3Q16 Earnings Call Notes

Microchip Technology’s (MCHP) CEO Steve Sanghi Discusses Q3 2016 Results

The majority of the inventory correction is behind us

“I will now provide guidance for the March 2016 quarter. We believe that our business has stabilized and that the majority of the inventory correction is behind us. The March quarter is impacted negatively by the Chinese New Year holidays in Asia but it is also the strongest quarter of the year for Microchip in Europe. Based on our analysis of economic and semiconductor industry conditions, as well as our own business indicators, we are guiding the March quarter non-GAAP net sales to be between flat to up 3% sequentially.’

The Atmel acquisition doesn’t change our opinion of the ARM architecture previously expressed

“When Microchip was dismissive of the ARM architecture it was in response to investors question about replacing our PIC32 architecture which is MIPS based. In that regard, nothing has changed. We continue to hear from distributors and our customers that ARM has commoditized this market and Microchip’s PIC32 based solutions are differentiated in superior products in the marketplace. Therefore, Microchip has no plans to shell one or the other architecture. We will be the only company that will have ARM architecture when the customer demands an ARM solution, and we will have PIC32 when we can sell a differentiated solution like we have been doing for several years.”

December marks the bottom for us

“In closing, I would like to say that the December quarter marks the bottom for us for this correction and we are expecting a low single-digit sequential growth in the March quarter. Beyond the March quarter we get into two back-to-back seasonally stronger quarters for Microchip. These quarters beyond organic growth will also have incremental accretion from the restructuring of Micrel and these quarters will begin to have accretion from the closing of the Atmel transaction.”

Demand is normal in the US and Europe, weaker in China

“The demand environment in U.S. and Europe is about normal. The demand environment in China has been weaker than normal but we were the first ones to call the weakness in China which the industry has been experiencing for some time now. And we have modeled that weakness of China and especially also because of the Chinese New Year into our guidance that we have provided today.”

Acquisitions are an enormous amount of work

“the thing the investors and analysts have to recognize is that these acquisitions are an enormous amount of work, we take an enormous amount of Microchip executives and our people and our energy to bring these acquisitions which were underperforming, really doing nothing. Micrel had done 6.7% operating profit in the quarter we bought them. And now their operating profits are approaching 20% and will be 30% or higher by the time we are done. All that effort would have gone into our business.”

We are still formulating our opinions about what to do with Atmel

“Well, we’re not learning much about the business at this point in time. Atmel is essentially not shedding anything about the business. We still see that Antitrust hasn’t cleared and we still see the businesses as competitive. We’re largely getting through the people, we tour the facility, we’re learning where people are located, we’re starting to formulate some initial thoughts about how we will go about the integration. We have done enough of these that we know what burdens we have to push and what we have to do so we can get there quite quickly. But in the two weeks that have passed, they are not letting us into the business yet.”

The world knows that China is weaker than normal

“I don’t have any end market commentary but from a geography standpoint it is clearly a distinction, I mean the world knows at this point in time that China is weaker than normal and we’re finding that U.S. and Europe to be normal.”

We never look at an acquisition like it’s something we have to do

“The way we look at it is, we don’t look at any of the acquisition that is a must for us. We have not preceded any of the past acquisitions we have done with the eye towards that it’s an acquisition that we must do. We have done them because we found them, we were able to get them either at a reasonable price or we’re able to build a model where it would make sense but you’ve seen us walk away from acquisition, like we’ve walked away from CSL, we walked away from many, many other that did not come in the public domain.’

Ganesh Moorthy

Automotive has remained one of the more resilient market segments

“Automotive was strong as you noted in the December quarter and continues to be a stronger segment than some of the other ones. It’s consistent with what you’ve seen and in the other reports about automotive. It remains one of the more resilient market segments even in the broad-based weakness.”

Seagate FY 2Q16 Earnings Call Notes

Seagate Technology’s (STX) CEO Steve Luczo on Q2 2016 Results

Shipped 60 exabytes of storage

“Our HDD exabyte shipments for the December quarter were 60.6 exabytes, up 10% sequentially. Within this, enterprise exabyte shipments were up 21% sequentially, reflecting strong demand for our high-capacity enterprise products. Average capacity per enterprise drive was a new record of 2.2 terabytes, up 15% year-over-year.”

Surveillance and video applications growing rapidly

“Surveillance and video applications are growing rapidly and they are seeing strong demand for our products specifically designed for these workloads. Our retail, gaming and client offerings are continuing to move to higher capacity points and are benefiting from the recent launch of products with industry leading areal density.”

Global economic concerns should persist at least through June

“In the last several quarters, we have discussed our concerns over global economic conditions, particularly in Europe and China, which have proven accurate and we believe will persist at least through June this calendar year.”

Expect overall storage market demand will be seasonally down

“Taking into account macroeconomic factors, we believe overall storage market demand will be seasonally down in the March quarter which has ranged between 5% and 10% over the last five years. We are planning for revenues to be approximately $2.7 billion, which reflects the high end of the seasonal demand trend and operating expenses to be sequentially flat.”

Toshiba probably wont be in this business in one to three years

“if you had asked me where was my gauging of would Toshiba be in the business in the next one to three years today versus where was it six months or a year ago, I am much more towards the end that they are not going to be in this business in the next one to three years, just because I don’t how I see how they can be competitively, given where areal density is going and given where manufacturing is and given some of their bigger corporate issues, I just can’t imagine that that’s where they want to spend their R&D expense or frankly their cash flow.’

Texas Instruments 4Q15 Earnings Call Notes

Texas Instruments, Incorporated. (TXN) Q4 2015 Results

David Pahl – Vice President and Head of Investor Relations

Saw weakness in mobile phones

“The sector where we saw the weaknesses you were guessing is mobile phones and we did see that sector weaken late in the quarter, in the back half of the month of December. If I just take and look at for the year how our end markets did, I’ll put that into perspective. I’ll start with an area of strength in automotive. That grew in the mid teens. Most of the sectors inside of that growing, growing double-digits…Communications equipment was down 20%. And that was primarily driven by wireless infrastructure and that was down around 30% for the year. ”

We haven’t seen any sign posts that this is a traditional cycle

“We’ve had some people ask us if we think a semiconductor cycle is underlying what we’re seeing and we just haven’t seen those signs of a traditional cycle. So there are things like our lead times continue to remain short. Our cancellations remain very low. Our distribution inventory continues to hold around 4 weeks. And we continue to deliver our products on time to our customers when they’re asking at very, very high service levels. So those are some of the bigger ones that come to mind, that you would see some movement if you were moving through a bottom or a top of the cycle, and we just haven’t seen that in quite some time.”

Our industrial exposure is very different than most might expect

” just want to remind those that may not be as familiar with us, when we talk about our industrial market, it’s something that’s very broad and different than what a typical investor would look from an industrial screen. So we’ve got 14 sectors that makes up industrial and they’ll include things like factory automation, medical and healthcare, building automation, grid infrastructure, test measurement, motor drives, electronic point of sale, space and avionics, display power delivery, appliances, lighting, industrial transportation and then a bucket of everything else that goes into it. So slightly or very different than what most people would think of in industrials.”

We think there’s more semiconductor content going into the industrial market and we’re being buoyed by that

“typically a lot of people ask us, hey, we hear the rumors in China. We see the stocks that they follow maybe in the industrial segment are seeing very, very, very weak demand. But we turned in revenue that was consistent with what we saw after a very strong year. And fundamentally what we think’s going on inside of that is that there’s more semiconductor content going into the industrial market and we think we’re in the very early stages of that.”

Kevin P. March – Senior Vice President, Chief Financial Officer, Finance & Operations

Weak macro economy, but aside from personal electronics, the balance is pretty flat

“I think that at the highest level, we think we’re continuing to operate in a relatively weak macro economy as we have been for the last couple of years. So nothing terribly exciting in the economy as a whole. If we kind of look at the comparison we’re talking about, recall that a year ago, we were seeing sharp declines occurring in communications infrastructure and we’re also seeing some pretty stiff headwinds in the form of foreign exchange where if the rate of exchange moving against us from the US dollar strength standpoint. So despite that, when you take a look at all that, we actually see aside from this one sector of personal electronics, the balance of it’s going to be about even on a year-over-year basis.”