major CatalystS for This
price of ON Semiconductor Corp increased yesterday after Stephen Weiss had
pitched on CNBC that he sees the stock gaining by 50% this year.
will be looking for positivity from ON Semiconductor Corp. as it approaches its
next earnings report on February 07, 2022. The company is expected to report
EPS of $0.94, up 168.57% from the prior-year quarter. The most recent consensus
estimate is calling for quarterly revenue of $1.79 billion, up 23.84% from the
For the full
year, the Consensus Estimates are projecting earnings of $2.80 per share and
revenue of $6.68 billion, which would represent changes of +229.41% and
+27.21%, respectively, from the prior year.
NXP announced a strategic partnership with Foxconn Industrial Internet (FII), a
subsidiary company of Foxconn Technology. The partnership between the two
companies aims to accelerate automotive innovation by NXP providing Foxconn
Industrial Internet with its comprehensive portfolio of automotive
joint project will focus on the development of a fully digital cockpit solution
based on the NXP i.MX 8 QuadMax. NXP claims that this will enable global
automotive companies to deliver a vivid in-vehicle experience for their
customers. Essentially, the cockpit will include digital clusters and a head-up
display (HUD) system. The digital cockpit solution is expected to start mass
production in 2023.
Acquiring GT Advanced Technologies.....
made an agreement to acquire GT Advanced Technologies in exchange for
$415-million cash. With this acquisition, ON Semiconductor aims to increase the
supply of silicon carbide (SiC) to meet the growing customer demand for
SiC-based solutions. Further, the acquisition will bode well for the company’s
growing efforts to create intelligent power and sensing technologies.
usage of electronic products such as wearables, smartphones and laptops is also
driving the demand for integrated chips. Also, the increasing demand for
autonomous and electric vehicles is proliferating the semiconductor industry.
the World Semiconductor Trade Statistics, annual global semiconductor sales are
expected to register 25.6% growth in 2021, with a market size of $553 billion,
driven by strength in memory, analog and logic. Further, the organization
expects growth of 8.8% in 2022.
the Precedence Research report indicates that the semiconductor market is
likely to reach $808.5 billion by 2030 from $430 billion in 2021, witnessing a
CAGR of 6.6% between 2021 and 2030.
Driving Semiconductor Sales…..
pandemic has brought about a rapid shift to digitization, spurring demand for
various products and devices dependent on chips for their functioning.
health crisis has necessitated the use of PC systems, be it for remote work,
web-based learning, video conferencing, video gaming, social media, consumer
entertainment and streaming, or online shopping.
over the years, the automotive sector has also evolved to include more electronic
components in vehicles that rely on semiconductors. Markedly, following a dip
in sales last year due to the pandemic, auto sales have made a remarkable
comeback in 2021. Furthermore, IHS Markit predicts global light vehicle
production to increase 10.6% year over year in 2022.
robust recovery in smartphone sales is boosting demand for semiconductors.
According to the latest forecast by International Data Corporation (“IDC”),
worldwide shipment of smartphones will likely be up 5.3% year over year to 1.35
billion units in 2021. This suggests a sharp improvement from the 10.5% decline
registered in 2020. Moreover, IDC predicts global smartphone shipment to grow
3% in 2022.
are the backbone of the current-day technology-driven economy. The digitization
across industries, adoption of cloud computing, and the integration of
artificial intelligence and machine learning are likely to fuel demand for
accelerated deployment of 5G technology — the next-generation wireless
revolution — is likely to propel further growth. Apart from this, blockchain,
Internet of Things, autonomous vehicles, augmented reality/virtual reality and
wearables are other growth prospects.
latest WSTS data, the global semiconductor market is predicted to improve 25.6%
in 2021, based on double-digit growth across all major product categories,
except Optoelectronics. The organization predicts global semiconductor sales to
grow 8.8% in 2022.
The boom in
sales will be driven by "unusually strong" demand for consumer
electronics, according to a new study from Euler Hermes, a subsidiary of German
financial services company Allianz.
is expected to grow 9 per cent in 2022, leading it to surpass the $600bn mark,
Euler Hermes predicts.
"The current semiconductor
cycle has been firing on all cylinders since the industry emerged from its
worst recession in 2019 [minus 12 per cent]. Volumes have been driven by
unusually strong demand for consumer electronics, prices have increased because
of a tight supply/demand equilibrium and the product mix has improved with the
introduction of higher-priced, new-generation chips using the 5nm manufacturing
node," the credit
insurance company said.
computers, smartphones, and audio and video equipment accounted for 80 per cent
of final semiconductor sales and were the three main factors driving the
Goldman Sachs analyst Toshiya Hari revealed Monday, in a new research
note, that ON Semiconductor is one of his top picks in the chip space.
however, that stock selection in chips will take on greater importance this
year after a strong run-up across the sector in 2021.
"Despite the cyclical concerns,
we believe 2022 will offer ample single stock opportunities given the
dispersion in price performance we have witnessed over the past several years.
Similar to our approach heading into 2021, we recommend investors own
companies/stocks with idiosyncratic drivers that can augment growth in a
sustained upturn or at least partially offset broader industry weakness should
a downturn kick in," said Hari.
Hari reflects on several factors.....
are sector specific catalysts such as expanding budgets by companies for data
centers, ongoing 5G smartphone adoption and infrastructure rollout, and a
rebound in auto and industrial production.
Explained Hari, "An
acceleration in a wide range of secular trends (e.g. transition to the cloud,
proliferation of AI/ML, EV/ADAS, and FA, among others) that are enabled by
semiconductors has driven or is driving a fundamental shift in the industry’s
trend-line. All in, while we enter 2022 with a somewhat guarded posture, we
expect fundamentals to remain strong through 1H22, and for any signs of
cyclical moderation/weakness to show up in the latter part of the year, at the
Also, Hari believes sticky inflation is good and relative valuation
its third consecutive year of outperformance vs. the S&P 500, the SOX
[Index] is trading at a ~21% premium to the SPX on NTM P/E [multiple] and near
its highs since 2010. The valuation picture, however, is less acute for the
median stock in our coverage universe. In fact, the median stock in our coverage
is currently trading at a ~7% discount to the SPX. While we are clearly
cognizant of the cycle and the tendency for multiples to compress as we
approach the peak of a cycle, we believe the sector deserves to trade at a
premium to the broader market for its above-average.....
- revenue growth profile,
- margin profile,
- FCF generation,
- shareholder return profile, and
- barriers to
entry," Hari added.