MPI : Identifying Market Demand&Opportunities (part 1)

I am obliged to  tell/warn u that this post is mainly about facts & figures regarding semiconductor industry and key segments review of MPI, u may get bored easily if u r not interested :)

for those interested, pls have a look on A Quick Review on MPI Q3 Result before continue

Industry Review

Economic instability, inventory excess, weak demand for PC’s, tablets, and mobile products in the past three years has caused slow growth for the semiconductor industry.

source: http://www.gartner.com/newsroom/id/3385417

Fortunately, the worst appears to be over :) The Semiconductor Industry Association announced worldwide sales of semiconductors Jan 2017 increased 13.9% as compared to the Jan 2016. Jan marked the global market’s largest yoy growth since Nov 2010. Yoy sales increased substantially across all regions: China (20.5%), the Americas (13.3%), Japan (12.3%), Asia Pacific/All Other (11.0%), and Europe (4.8%). Following the industry’s highest-ever revenue in 2016, the global market is well-positioned for a strong start to 2017 (Mar, 2017).

Source: https://www.semiconductors.org/news/2017/03/06/global_sales_report_2015/january_semiconductor_sales_up_14_percent_compared_to_last_year/

Worldwide semiconductor revenue is estimated to total $386 billion in 2017, an increase of 12.3% from 2016, according to Gartner (April, 2017).

Source: http://www.gartner.com/newsroom/id/3678417

Operating Segments Review

MPI's principal activities are manufacturing, assembling, testing and sale of integrated circuits, semiconductor devices, electronic components and leadframes. It is operating in 4 major segments, namely consumer/ communications, industrial, automotive and PC/notebook segments. Its product offerings within the communications (RF PA, RF switches, Sensors, TVS), infrastructure (RF switches, Low noise amplifiers, Clocks), industrial (PMIC, Amplifiers, iSolators) and automotive (TPMS, LED driver, Airbag control) segment. Several of its top ten customers are leaders within the IoT and automotive space (July 2015, TA Securities).

Consumer/ Communications Segment  (smartphones,tablets, feature phone)

Continual Growth of Global Smartphone Market

Global Smartphone Sales is expected to grow 7% in 2017, improved from 2% annual growth rate in 2016, thanks to improved economic situations in selected regions / countries, as well as expected hardware innovations which would trigger strong replacement sales. Asia Pacific remains as the biggest region, followed by North America. Africa Middle East will maintain the highest growth rate through 2022. The three largest smartphone countries by far in the next five years will be China, India and the USA, due to their massive populations (Mar, 2017).

source: https://www.strategyanalytics.com/strategy-analytics/blogs/devices/smartphones/smart-phones/2017/03/10/global-smartphone-sales-to-grow-7-yoy-in-2017#.WPq1gtKGOMp

According MAW, the global smartphone market is now expected to witness substantial growth over the forecast period owing to advancements in the electronic, telecommunication, and m-Commerce industry as well as the increasing penetration of the Chinese smartphone industry. Overall, the global smartphone market is projected to register a healthy CAGR of 7.9% in terms of value and 5.8% in terms of volume during the forecast period 2016-2024 (apr, 2017).

source: https://mobilemarketingwatch.com/theres-no-slowing-global-smartphone-growth-71535/

MPI is benefiting from the growth of global smartphone sales. Despite MPI is trying hard to shift its focus and operation to automotive segment, due to cyclical nature of smartphones, contribution from the smartphone segment is still significant at the moment (around 40%). 

PC/Notebook Segment

Global PC shipments fell 2.4% in Q1 2017, 10th quarter of decline in a row (April, 2017).

source: https://venturebeat.com/2017/04/11/gartner-global-pc-shipments-fell-2-4-in-q1-2017-10th-quarter-of-decline-in-a-row/

Revenues from the PC segments should continue to fall in tandem with the structural decline in end-demand (source: AllianceDBS Research). Contribution from PC segment is considered great if managed to maintain or only fall marginally over the years (not gonna talk much as i think PC industry is dying).

Automotive Segment

The future of the global automotive semiconductor market looks good with opportunities in the passenger car and commercial vehicle segments. The global automotive semiconductor market is expected to reach an estimated $45.9 billion by 2022 and it is forecast to grow at a CAGR of 6.4% from 2017 to 2022. The major drivers of growth for this market are increasing vehicle production, increasing semiconductor content per vehicle, growing demand for advanced vehicle safety and comfort systems, and growing government regulations regarding CO2 emissions (Apr, 2017).

source :http://finance.yahoo.com/news/growth-opportunities-global-automotive-semiconductor-221600855.html

MPI plans to grow its automotive contribution from 24% of group revenue in FY16 to 50% over the next 2-4 years (TA Research). Strategy to grow the automotive sales contribution will reduce the earnings volatility in the communication, Automotive is typically more stable over time because of longer product life cycles (AllianceDBS Research). Among products currently produced include tyre pressure monitors, proximity sensors and airbags (TA Research).

According to Kenanga Research, MPI sales will be underpinned by the increasing number of new product introductions in Automotive, MPI mentioned that leading Automotive technologies that are used for safety features (such as advanced package for pressures, magnetic, acceleration sensors), have already passed the stringent qualification stage and will see more meaningful earnings fruition in the coming quarters.

According to CIMB Research, MPI's new airbag sensor production is gaining traction despite having only started production in the past 4-6 months. MPI is the single source supplier of the sensor for a European automaker and has shipped about 6-7m units of the airbag sensor to this client since beginning production at end-2016.  

In short, strategy to focus on automotive sector is brilliant due to its high barriers of entry and stable recurring income, which can offset the cyclical nature of communication sector and decreasing demand in PC. 

Industrial Segment

The global market for industrial semiconductor is projected to reach US$60 billion by 2022, driven by growing trend towards digital manufacturing,  robust investment in industrial automation technologies and the growing role played by electronics in developing intelligent automation solutions.

take some time to read full article at http://www.strategyr.com/pressMCP-7918.asp to understand the overall industrial semiconductor market. 

Industrial semiconductors are used in several applications, including manufacturing and process automation, power and energy, medical, test and measurement, building and home control, and military and civil aerospace.

source: http://marketrealist.com/2015/12/will-drive-growth-industrial-semiconductor-market/

“MPI is focusing on growing its industrial earnings as industrial markets for semiconductors are projected to grow 8.1% annually over the next four years,” this is mentioned in CIMB Research on 25 July 2016. Not much info I can get from AR or research report regarding its industrial segment, but industrial segment remains quite stable over the years (21%-24% of the sales), I can only assume this segment should grow consistently over the years.

I will talk about Capex expenditure, SWOT, financial ratio and forecast P&L if time allows~~

朋友问：花这么多时间研究一间公司，很赚很多钱的哦？

我答：不肯定，至少跌的时候我不会怕 :)

Disclaimer: it isn't a buying recommendation, your money, your decision