Amazing Microelectronic (6411.TW/6411 TT, NR): Growing on spec upgrade cycle
KGI Greater China
18 Feb 2014
Available for Immediate Download
A critical technology to conquer electrostatic discharge issue As the semiconductor sector aggressively pushes technology migration, electronic components become more vulnerable to electrostatic discharge (ESD), which often causes manufacturing yield loss and operation malfunction. Also, the trend to packing more circuits onto miniature devices weakens ESD protection capability of electronic components. As a result, the elevating ESD threat prompts transient voltage suppresser (TVS) proliferation, which enables better package integration and improved work stability. Based on NanoMarket estimates, overall ESD solution market will grow double-digit YoY during 2013-19, and TVS should account for the largest market share. Smart devices to drive up TVS demand According to Gartner data, smartphone shipments will see a 36% CAGR from 680mn units in 2012 to 1.25-1.27bn units in 2014, as smartphone penetration rates in emerging markets remain lower than developed markets (we estimate 35-40% for China vs. over 70% for developed markets), and ASP for low-cost and midrange models in the mainstream segment fall. The tablet market is replicating smartphone growth. Furthermore, we note competition of smart devices has intensified on the accelerated spec upgrade cycle (more complicated components installed on smaller PCB), and thus the ESD threat increases on incremental signal interference, resulting in greater demand for TVS, benefiting Amazing Micro. Profitability improving on expanding economies of scale Citing solid R&D capability, Amazing has received positive feedback from customers and seen profitability stabilize on improved economies of scale. 2013 revenue of NT$1.36bn was flat with 2012's NT$1.35bn, while Jan-Sep gross and operating margins rose 5.6 ppts and 3.7 ppts, respectively, from 2012's 27.6% and 10%, to 33.1% and 13.7%, compared with guidance of 30% and 11%. Accordingly, EPS should grow YoY to surpass 2012's NT$2.90. Investment risks Market share loss in TVS array segment; faster-than-expected ASP decline; worse-than-expected inventory adjustment due to macro economy.