Win Semi likely to benefit from US-China dispute 1

Win Semiconductors Corp (穩懋半導體) stands to be the radio frequency (RF) foundry service provider that benefits the most as Chinese smartphone brands shift orders from US companies to Asian vendors amid the lingering US-China trade dispute, Bank of America Merrill Lynch said in a research note on Wednesday.

Based in New Taipei City’s Linkou District (林口), the company is the world’s largest pure-play gallium arsenide foundry, providing components, such as power amplifiers and switches for wireless communications devices, to customers in the communications sector.

As power amplifier vendors in Asia are mostly design companies, Win Semiconductors has received more foundry orders from Chinese smartphone brands, while it is finding it difficult to tap into the US market, where some power amplifier vendors are also integrated device manufacturers, industry watchers have said.

“Amid the backdrop of US-China trade frictions, we envision a reshaping of the global RF supply chain that should favor Win Semi in the medium to long-term,” Bank of America Merrill Lynch analysts Robin Cheng (程翔) and Mike Yang said in the note. “We estimate an incremental revenue opportunity of US$400 million from Chinese smartphone OEMs [original equipment manufacturers] in the next three to five years.”

Considering the proliferation of 5G cellular, Wi-Fi components and infrastructure-related applications, as well as rising orders from fabless companies, “we expect the foundry TAM [total addressable market] in power amplifiers available for Win Semi to grow at a compound annual growth rate of 15 percent to US$1.6 billion by 2023,” the analysts said.

Win Semiconductors reported second-quarter revenue of NT$4.45 billion, up 23 percent from the first quarter’s NT$3.62 billion and exceeding the company’s guidance of a mid-teen percentage increase.

The company is to release its second-quarter bottom-line figures and provide its third-quarter business outlook at an investors’ conference tomorrow.

The firm’s second-quarter results might improve due to higher capacity utilization, with earnings per share estimated at NT$1.5 to NT$1.7, compared with NT$0.41 in the first quarter, and a gross margin of 34 percent, up from 25 percent, Bank of America Merrill Lynch said.

As for this quarter, revenue is forecast to increase 21 percent quarterly, thanks to key customers’ iPhone share gains, rising orders from Asian fabless customers and seasonal demand for vertical-cavity surface-emitting laser (VCSEL) components, with a gross margin of 36 percent, Bank of America Merrill Lynch said.

Capital Investment Management Corp (群益投顧) said that the company’s outlook for the second half of this year would be better than the first half, as Apple Inc is expected to release new iPhone and iPad models featuring better facial recognition, which could boost Win Semiconductors’ VCSEL revenue.

Win Semiconductors tapped into the VCSEL segment in the third quarter of 2017. Related end-market applications include facial recognition, augmented reality and autonomous driving.

“Among Win Semiconductors’ various product lines, the VCSEL segment shows the greatest potential,” Capital Investment said.

Win Semiconductors shares on Friday rose 0.92 percent to close at NT$275 in Taipei trading. They have increased 133.05 percent so far this year.