Here Are Goldman's Top Takeaways From Its Semiconductor Convention As Tech Execs Focused On AI

Analysts Notebook wrote a column · Jun 6, 2023 04:50

Last week, Goldman hosted the 2nd Annual World Semiconductor Conference in New York, where they gained valuable insight from the semiconductor companies.

Here are Goldman's top nine takeaways from the chip conference:

1) Focus on AI:

There was an immense focus on AI throughout conference with semiconductor companies, in particular, speaking to the near- and long-term opportunity related to this growing theme.

· $Intel(INTC.US)$highlights their Sapphire Rapids processors is well-suited for AI workloads, while management also shared that its pipeline for Gaudi had increased ~2.5x in the preceding 90-day period.

· $Marvell Technology(MRVL.US)$ expects optical DSPs and custom compute processors are expected to lead to a more than doubling of AI revenue in FY2024 and FY2025 from a base of ~$200mn in FY2023.

· $Micron Technology(MU.US)$ sees AI as a significant long-term growth driver given the implications for content growth. Micron believes AI servers can embed 8x the amount of DRAM and 3x the amount of NAND compared to a traditional server.

· $RENESAS ELECTRONICS CORP(RNECF.US)$ highlighted the medium- to long-term growth potential in MCUs, particularly at the edge (i.e. multi-billion dollar SAM). Renesas recently acquired Reality AI to augment its MCU capabilities particularly across industrial applications (e.g. HVAC), as well as its ongoing investments in CXL memory accelerators.

· $Advantest (ADR)(ATEYY.US)$ sees HPC/AI as a medium- to long-term growth driver given the expected increase in transistor count, potential test intensity increase, and their confidence in defending their dominant market position.

2) Signs of stabilization within the PC market and memory fundamentals bottoming:

There have been signs of stabilization are rising in the PC market as well as signs the memory industry is finally "bottoming."

$Intel(INTC.US)$ elevated the mid-point of its 2Q revenue outlook from $12.0bn to $12.25bn (+5% qoq, -20% yoy) based on strong linearity in Client Computing (i.e. PC), Data Center and AI so far in the quarter.

$Micron Technology(MU.US)$ reiterated its expectation for customer inventory in PCs (and smartphones) to be at or near normal levels after the end of the second quarter.

3) Benign pricing in analog/MCU/vitality semis:

In broad-based MCU, analog and power semis, $Microchip Technology(MCHP.US)$ reaffirmed its revenue outlook for the June quarter(+2-3% qoq) and September quarter (now not going to be down qoq).

In terms of pricing, Infineon said that pricing remained resilient across all divisions, and is even increasing in certain pockets where demand is strong.

4) TEL presents bullish CY2024 WFE market outlook:

Tokyo Electron (TEL) reiterated its view that the WFE market in 2024 could recover to a level similar to 2022 (which implies a ~25% yoy increase), driven by a data center upgrade cycle and a recovery in Memory spending following a sharp inventory adjustment this year.

5) Gate-All-Around to drive advanced Logic/Foundry spend:

$Applied Materials(AMAT.US)$, $ASML Holding(ASML.US)$, ASM International, and Tokyo Electron all highlighted Gate-All-Spherical (GAA) as a potential driver of higher spending in advanced Logic/Foundry in the coming years.

Applied Materials said on a recent earnings call that the GAA inflection will create an incremental opportunity of ~$1bn for every 100k wafer starts of capacity and expected to gain 5% of transistor market share in the transition from FinFET to GAA.

6) Constructive long-term outlook on mature node capital investments:

Applied Materials reiterated that given the strong momentum in China, Japan, Europe and the United States, its ICAPS (IoT, Communications, Automotive, Power and Sensors) business is on track to grow faster in 2023 than in 2022. While they expect capital spending across mature/specialty nodes to remain cyclical.

TEL stated that they expect WFE demand associated with mature process nodes could reach ~$50bn by 2030, up from ~$30bn in 2023.

7) Industry wafer starts to recover in the second half of the year:

$Entegris(ENTG.US)$ reaffirmed its 2023 market outlook — specifically, a mid-teens (%) yoy decline in MSI and a ~20% yoy decline in industry capex. That said, the company expects a modest recovery in the second half of the year, driven by growth in AI and the launch of new consumer electronics.

8) Near-term caution on wafer volumes but ASP outlook intact:

SUMCO is relatively cautious about the outlook for its silicon wafer business as the ongoing inventory correction in Memory is likely to drive shipments down sharply in the second half of the year.

On the positive side, management stated that wafer pricing continues to be in line with the price agreed in LTAs and wafer pricing is now expected to increase ~10% yoy in 2024.

9) CHIPS Act:

Todd Fisher, leading the CHIPS for America offices appointed by the Biden-Harris Administration, clarified the Biden administration's long-term goals of building out America's domestic chip production while noting that there is "no bias either way in the treatment of a domestic or international applicant as the goal of the program is to encourage companies to invest in R&D and for IP to reside in the US."

Source: ZeroHedge

Disclaimer: Investing involves risk and the potential to lose principal. Past performance does not guarantee future results. This is for information and illustrative purposes only. It should not be relied on as advice or recommendation.

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