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Will AI Save the Chip Industry?

Investors Alley
Will AI Save the Chip Industry?
The pandemic certainly turned the semiconductor industry on its head. Despite record production of semiconductors,…

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4 months ago

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Investors Alley
Will AI Save the Chip Industry?

The pandemic certainly turned the semiconductor industry on its head.

Despite record production of semiconductors, there were shortages everywhere. That led to months-long waiting lists for many consumer products. So, to meet consumer demand, semiconductor makers ramped up supply.

But then inflation arrived and decided to stay awhile. Central banks responded by raising rates, and economies slowed. The appetite for items like consumer electronics waned, leaving inventories stuffed full of chips.

The entire semiconductor supply chain is still feeling the ramifications.

But there’s a bright light on the horizon every investor should know about…

Chip Demand Slowdown

In fact, seven out of the nine top chipmaking equipment manufacturers globally are likely to log a sales decline in the current quarter as their clients rein in capacity investment in the face of a worsening semiconductor market.

This is a clear sign of global market deterioration from the previous quarter, when six of the top nine players reported revenue growth.

Slowing investment by semiconductor manufacturers is the main reason behind the lackluster current outlook. Memory chipmakers, in particular, have been hit hard by the slump in demand for smartphones and servers, as well as plummeting prices.

All nine of the top chip equipment companies project an uptick in demand in the latter half of this year, compared with the first half. But given the risk that capital investments by Taiwan Semiconductor Manufacturing (TSM) and Samsung Electronics will come in below initial plans, the timing of a market recovery is hard to pinpoint.

During a recent earnings call, Applied Materials (AMAT) CEO Gary Dickerson said: “Measured as a percentage of total wafer fab equipment, memory spending is tracking at its lowest level in more than a decade.…In leading-edge foundry-logic, we have also seen customers trimming their spending plans for the year.”

Another factor adding to the slowdown is that U.S.-led restrictions on exports to China are reducing sales of equipment for advanced products to China. AMAT’s sales to China, for example, fell 34% year over year to just $1.4 billion, thanks to the U.S. government export restrictions.

However, demand for non-advanced products—such as for automotive and industrial applications—has been holding firmer than expected.

In China, investment in non-advanced products (which have escaped U.S. export restrictions) remains brisk. These include internet of things (IoT), communications, automotive power, and sensor (ICAPS) products.

Applied Materials’ Dickerson also noted that: “While China currently leads in ICAPS spending, we see other countries increasing their investments at a higher rate. In fact, the fastest growing regions for our ICAPS business in 2023 are the U.S., Europe and Japan.”

An AI Chip Boom and AMAT

But despite the current downbeat environment, the stock prices of chip equipment manufacturers have been steadily on the rise since October 2022. This reflects investor hopes for a bottoming of the chip market, mainly thanks to generative artificial intelligence. In other words, stock prices for these companies have already begun to factor in future growth, given the arrival of generative AI and large U.S. Subsidies from the Chips Act.

So let’s look at one of the likely beneficiaries, the aforementioned Applied Materials, which is the world’s largest manufacturer of wafer fabrication equipment for the semiconductor industry. It is the chip equipment industry’s standard bearer. The company has the broadest product portfolio and offers customers the closest thing to a one-stop shop.

Currently, Applied Materials is in the same boat as its peers. On May 18, the company announced that sales for the May–July quarter would likely be $5.75 billion to $6.55 billion, forecasting a range between a 12% decline and a slight increase. A decline would be its first since the August–October quarter of 2019.

In my view, though, results midway through fiscal 2023 validate the belief that the company’s business is more resilient than the wafer fab equipment market overall. Some reasons to think that include its still high—though no longer record-level—backlog, and growth in services.

However, the most compelling reason is Applied Materials’ extensive presence in ICAPS (non-cutting edge) applications. ICAPS products are holding up quite well in the current environment; for example, robust demand for its ion implantation tools is being driven by investments in silicon carbide manufacturing to support the rising production of electric vehicles.

Further, Applied Materials is set to enjoy a surge in demand after announcing a new chipmaking system that lowers the cost of etching transistors into semiconductors. This allows the company to make high-performing transistors at a lower cost for makers of semiconductors, giving it a clear competitive advantage over its rivals.

After another solid quarter of outperformance versus Street expectations, CEO Dickerson emphasized that Applied Materials expects to outperform its markets in 2023, saying the long-term outlook remains highly positive, as semiconductors become a larger and more strategically important market globally. In this environment, Applied Materials should benefit from “outsized” growth opportunities over the long term.

Applied Materials confidently says it is “the leader in materials engineering solutions used to produce virtually every new chip and advanced display in the world.” Of course, with AI exploding and chips needed to both create the technology and allow it to carry out inference activities, many new chips will have to be manufactured over the longer term.

The company itself reported in February that it was benefiting significantly from the proliferation of AI. Indeed, it specifically named AI, along with automotive, high-performance computing, industrial automation, and clean energy, as the sectors that were “more resilient” to macroeconomic pressures. Its installed base of more than 43,000 tools is the largest in the industry, which gives me added confidence in the company’s future.

In mid-March, Applied Materials announced a 23% hike in its quarterly dividend—representing a substantial step up from an average hike of 6.5% in the past four years—and added $10 billion to its share buyback plan.

CEO Gary Dickerson stated that the higher dividend and buyback authorization reflected the company’s positive long-term view of the semiconductor market and the company’s own growth opportunities.

AMAT stock is still down more than 20% from its $155.78 high, even though it is up 25.5% year-to-date, trading at $121 per share. The stock is a buy anywhere under $130 a share.

Bank expert: “I popped champagne after the collapse”

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“This banking collapse just opened the floodgates for a once-in-a-decade investment opportunity.” >>Click here to see how Tim plans to capitalize on it.

 

Will AI Save the Chip Industry?
Tony Daltorio

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Von Der Leyen Speech Suggests Russia Dropped Nuke On Hiroshima 

Von Der Leyen Speech Suggests Russia Dropped Nuke On Hiroshima 

Von der Leyen just said what?…

This past Wednesday, President of the European…

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2 hours ago

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September 24, 2023

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Von Der Leyen Speech Suggests Russia Dropped Nuke On Hiroshima 

Von der Leyen just said what?...

This past Wednesday, President of the European Commission Ursula von der Leyen delivered a speech before the 2023 Atlantic Council Awards in New York, where she sounded the alarm over the specter of nuclear war centered on the Russia-Ukraine conflict. But while invoking remembrance of the some 78,000 civilians killed instantly by the atomic bomb dropped on Hiroshima at the end of WWII, she said her warning comes "especially at a time when Russia threatens to use nuclear weapons once again". She  actually framed the atomic atrocity in a way that made it sound like the Russians did it. Watch:

There was not one single acknowledgement in Von der Leyen's speech that it was in fact the United States which incinerated and maimed hundreds of thousands when it dropped no less that two atomic bombs on Japanese cities.

Here were her precise words, according to an Atlantic Council transcript...

You, dear Prime Minister, showed me the meaning of this proverb during the G7 summit in Japan last year. You brought us to your hometown of Hiroshima, the place where you have your roots and which has deeply shaped your life and leadership. Many of your relatives lost their life when the atomic bomb razed Hiroshima to the ground. You have grown up with the stories of the survivors. And you wanted us to listen to the same stories, to face the past, and learn something about the future.

It was a sobering start to the G7, and one that I will not forget, especially at a time when Russia threatens to use nuclear weapons once again. It is heinous. It is dangerous. And in the shadow of Hiroshima, it is unforgivable. 

The above video of that segment of the speech gives a better idea of the subtle way she closely associated in her rhetoric the words "once again" with the phrase "shadow of Hiroshima" while focusing on what Russia is doing, to make it sound like it was Moscow behind the past atrocities.

Via dpa

Russian media not only picked up on the woefully misleading comments, but the Kremlin issued a formal rebuke of Von der Leyen's speech as well:

In response to von der Leynen's remarks, Russian Foreign Ministry spokeswoman Maria Zakharova accused the European Commission president of making "no mention whatsoever of the US and its executioners who dropped the bombs on populated Japanese cities."

Zakharova responded on social media, arguing that von der Leyen's assertions on Moscow's supposed intentions to employ nuclear weapons "is despicable and dangerous" and "lies."

Some Russian embassies in various parts of the globe also highlighted the speech on social media, denouncing the "empire of lies" and those Western leaders issuing 'shameful' propaganda and historical revisionism.

Tyler Durden Sun, 09/24/2023 - 13:15

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Saudi Arabia Sentences Schoolgirl To 18 Years In Prison Over Tweets

Saudi Arabia Sentences Schoolgirl To 18 Years In Prison Over Tweets

Via Middle East Eye,

Saudi Arabia has sentenced a secondary schoolgirl…

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3 hours ago

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September 24, 2023

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Saudi Arabia Sentences Schoolgirl To 18 Years In Prison Over Tweets

Via Middle East Eye,

Saudi Arabia has sentenced a secondary schoolgirl to 18 years in jail and a travel ban for posting tweets in support of political prisoners, according to a rights group.

On Friday, ALQST rights group, which documents human rights abuses in Saudi Arabia, revealed that the Saudi Specialised Criminal Court handed out the sentence in August to 18-year-old Manal al-Gafiri, who was only 17 at the time of her arrest.

Via Reuters

The Saudi judiciary, under the de facto rule of Crown Prince Mohammed bin Salman, has issued several extreme prison sentences over cyber activism and the use of social media for criticising the government.

They include the recent death penalty against Mohammed al-Ghamdi, a retired teacher, for comments made on Twitter and YouTube, and the 34-year sentence of Leeds University doctoral candidate Salma al-Shehab over tweets last year.

The crown prince confirmed Ghamdi's sentence during a wide-ranging interview with Fox News on Wednesday. He blamed it on "bad laws" that he cannot change. 

"We are not happy with that. We are ashamed of that. But [under] the jury system, you have to follow the laws, and I cannot tell a judge [to] do that and ignore the law, because... that's against the rule of law," he said.

Saudi human rights defenders and lawyers, however, disputed Mohammed bin Salman's allegations and said the crackdown on social media users is correlated with his ascent to power and the introduction of new judicial bodies that have since overseen a crackdown on his critics. 

"He is able, with one word or the stroke of a pen, in seconds, to change the laws if he wants," Taha al-Hajji, a Saudi lawyer and legal consultant with the European Saudi Organisation for Human Rights, told Middle East Eye this week.

According to Joey Shea, Saudi Arabia researcher at Human Rights Watch, Ghamdi was sentenced under a counterterrorism law passed in 2017, shortly after Mohammed bin Salman became crown prince. The law has been criticised for its broad definition of terrorism.

Similarly, two new bodies - the Presidency of State Security and the Public Prosecution Office - were established by royal decrees in the same year.

Rights groups have said that the 2017 overhaul of the kingdom's security apparatus has significantly enabled the repression of Saudi opposition voices, including those of women rights defenders and opposition activists. 

"These violations are new under MBS, and it's ridiculous that he is blaming this on the prosecution when he and senior Saudi authorities wield so much power over the prosecution services and the political apparatus more broadly," Shea said, using a common term for the prince.

Tyler Durden Sun, 09/24/2023 - 11:30

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Biden To Join UAW Picket Line As Strike Expands, Good Luck Getting Repairs

Biden To Join UAW Picket Line As Strike Expands, Good Luck Getting Repairs

Authored by Mike Shedlock via MishTalk.com,

In a symbolic, photo-op…

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4 hours ago

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September 24, 2023

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Biden To Join UAW Picket Line As Strike Expands, Good Luck Getting Repairs

Authored by Mike Shedlock via MishTalk.com,

In a symbolic, photo-op gesture to win union votes, Biden will head to Michigan for a token visit.

Biden to Walk the Picket Line

Taking Sides

CNN had some Interesting comments on Biden Talking Sides.

Jeremi Suri, a presidential historian and professor at University of Texas at Austin, said he doesn’t believe any president has ever visited a picket line during a strike.

Presidents, including Biden, have previously declined to wade into union disputes to avoid the perception of taking sides on issues where the negotiating parties are often engaged in litigation.

On September 15, the day the strike started, Biden said that the automakers “should go further to ensure record corporate profits mean record contracts for the UAW.”

Some Democratic politicians have been urging Biden to do more. California Rep. Ro Khanna on Monday told CNN’s Vanessa Yurkevich that Biden and other Democrats should join him on the picket line.

“I’d love to see the president out here,” he said, arguing the Democratic Party needs to demonstrate it’s “the party of the working class.”

UAW Announces New Strike Locations

As the strike enters a second week, UAW Announces New Strike Locations

UAW President Shawn Fain called for union members to strike at noon ET Friday at 38 General Motors and Stellantis facilities across 20 states. He said the strike call covers all of GM and Stellantis’ parts distribution facilities.

The strike call notably excludes Ford, the third member of Detroit’s Big Three, suggesting the UAW is more satisfied with the progress it has made on a new contract with that company.

General Motors plants being told to strike are in Pontiac, Belleville, Ypsilanti, Burton, Swartz Creek and Lansing, Michigan; West Chester, Ohio; Aurora, Colorado; Hudson, Wisconsin; Bolingbrook, Illinois; Reno, Nevada; Rancho Cucamonga, California; Roanoke, Texas; Martinsburg, West Virginia; Brandon, Mississippi; Charlotte, North Carolina; Memphis, Tennessee; and Lang Horne, Pennsylvania.

The Stellantis facilities going on strike are in Marysville, Center Line, Warren, Auburn Hills, Romulus and Streetsboro, Michigan; Milwaukee, Wisconsin; Plymouth, Minnesota; Commerce City, Colorado; Naperville, Illinois; Ontario, California; Beaverton, Oregon; Morrow, Georgia; Winchester, Virginia; Carrollton, Texas; Tappan, New York; and Mansfield, Massachusetts.

Contract Negotiations Are Not Close

Good Luck Getting Repairs

Party of the Working Cass, Really?

Let’s discuss the nonsensical notion that Democrats are the party of the “working class”.

Unnecessary stimulus, reckless expansion of social services, student debt cancellation, eviction moratoriums, earned income credits, immigration policy, and forcing higher prices for all, to benefit the few, are geared towards the “unworking class”.

On top of it, Biden wants to take away your gas stove, end charter schools to protect incompetent union teachers, and force you into an EV that you do not want and for which infrastructure is not in place.

All of this increases inflation across the board as do sanctions and clean energy madness.

Exploring the Working Class Idea

If you don’t work and have no income, Biden may make your healthcare cheaper. If you do work, he seeks to take your healthcare options away.

If you want to pay higher prices for cars, give up your gas stove, be forced into an EV, subsidize wind energy then pay more for electricity on top of it, you have a clear choice. If you support those efforts, by all means, please join him on the picket line for a token photo-op (not that you will be able to get within miles for the staged charade).

But if you can think at all, you understand Biden does not support the working class, he supports the unworking class.

Tyler Durden Sun, 09/24/2023 - 10:30

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