Investor Presentation_ Greater China Tech Semiconductor_ Looking for new opportunities in AI and non AI

Summary of the Conference Call on Greater China Tech Semiconductor Industry Overview - The focus is on the Greater China Tech Semiconductor industry, particularly in the context of AI and non-AI opportunities [1][2]. Core Insights - Top Investment Ideas: - Key Overweight (OW) recommendations include FOCI, Novatek, Asmedia, Nuvoton, Espressif, Montage, and Yangjie [5]. - Key Equal Weight (EW) recommendations include Aspeed and ASMPT [5]. - Key Underweight (UW) recommendations include Realtek, Winbond, and Macronix [5]. - Market Dynamics: - The broader semiconductor cycle recovery is slow, with AI cannibalization impacting general computing, consumer, and automotive sectors as enterprises prioritize AI investments [5]. - The value of AI semiconductors is increasingly tied to software rather than just semiconductor technology [5]. - China's capital expenditure (capex) is strengthening, leading to a slower recovery in mature node foundry utilization [5]. - An increase in semiconductor inventory days historically signals a negative trend for semiconductor stock price appreciation [5]. - Long-term Demand Drivers: - Tech diffusion is expected to drive a reacceleration in AI semiconductor demand, particularly due to generative AI applications across various sectors [5]. - Tech deflation is anticipated to stimulate demand for technology products through "price elasticity" [5]. Financial Metrics and Valuation - Valuation Comparisons: - TSMC (Ticker: 2330.TW) has a current price of 1,080.0 TWD with a target price of 1,388.0 TWD, indicating a 29% upside [6]. - UMC (Ticker: 2303.TW) has a current price of 43.0 TWD with a target price of 48.0 TWD, indicating a 12% upside [6]. - SMIC (Ticker: 0981.HK) shows a current price of 50.8 HKD with a target price of 38.0 HKD, indicating a 25% downside [6]. - Performance Metrics: - TSMC's P/E ratio is projected to decrease from 33.4 in 2023 to 17.7 in 2025, with EPS growth expected to rebound from -18% to 35% [6]. - UMC's P/E ratio is expected to decline from 8.8 in 2023 to 13.9 in 2025, with EPS growth projected to be negative [6]. Additional Insights - AI Semiconductor Growth: - Excluding NVIDIA's AI GPU revenue, non-AI semiconductor growth is projected at only 10% year-over-year in 2024 [11]. - The semiconductor supply chain is seeing a slight decrease in inventory days, which historically correlates with an increase in the semiconductor stock index [11]. - Technological Advancements: - TSMC's CoWoS (Chip on Wafers on Substrate) technology is becoming mainstream for 2.5D packaging, with plans for rapid expansion of advanced package plants in Taiwan [14][15]. - The global market for CoWoS is expected to grow significantly, with a projected CAGR of 172% from 2023 to 2030, reaching an estimated market size of US$9 billion by 2030 [36]. - CPO Technology: - CPO (Chip on Photonic Integrated Circuit) is highlighted as a power-saving solution that enhances data transmission speeds [26][36]. - FOCI is expected to see significant revenue growth from CPO-related business, primarily driven by partnerships with NVIDIA [38][41]. Conclusion - The Greater China Tech Semiconductor industry is navigating a complex landscape with both challenges and opportunities, particularly in AI and advanced packaging technologies. The focus on long-term demand drivers and strategic investments in key companies will be crucial for navigating this evolving market.