Weekly News 021

Contents:

1.?Stellantis to shift some Chinese EV production to Europe.

2.?Mature Process Wafer Prices See Rising as Price Wars Subside in China’s Foundries.

3.?Automotive Parts Inventory Clearance Evident as Southeast Asian Market Rise.

4.?Toshiba to invest $640m in semiconductors with an eye to EVs, electric grid.

5.?Broadcom's AI Business Booms with 280% Surge in Q2 Revenue.

1.?Stellantis to shift some Chinese EV production to Europe.

Stellantis will shift the output of some Chinese-brand electric vehicles to Europe, which is the latest sign of how global carmakers are changing their regional strategy after Brussels announced planned additional tariffs on EVs made?in China this week.

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The owner of the Citro?n and Fiat brands said in May that it would sell EVs from Chinese carmaker Leapmotor at its European dealerships from September. Chief executive Carlos Tavares confirmed on Thursday that some?cars would be produced in Stellantis plants in Europe.

“A certain number of [Leapmotor] products will have to be assembled in Europe,” Tavares said at Stellantis’s annual meeting in Detroit.

The largest Chinese EV maker, BYD, which received a lower tariff increase of 17.4%, plans to start producing cars at a site in Hungary next year and has been studying locations for a second plant in Europe. Another Chinese EV maker,?Chery, aims to make 150,000 cars a year from 2029 onwards at a plant in Barcelona.

Comment:?

LeapMotor and Stellantis formed a joint venture, LeapMotor International, on May 14. Stellantis controls the joint venture, which is split 51% to 49% in ownership between the two companies. ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?

2.?Mature Process Wafer Prices See Rising as Price Wars Subside in China’s Foundries.

The intense price competition in China's mature process wafer foundries is ending. Hua Hong Group, the second-largest foundry in China, is expected to raise prices by 10% in the year's second half, signaling the end of a two-year?downward trend in mature process prices. This indicates the industry is moving towards recovery. Taiwanese foundries like UMC, Vanguard, and PSMC, which focus on mature processes, are also anticipated to witness price hikes.

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Industry analysts point out that the future price rise in Hua Hong will be a significant indicator of recovery, symbolizing a rebound in consumer electronics demand and pushing Taiwanese foundries like UMC and Vanguard.

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Morgan Stanley, closely monitoring the mature process wafer foundry market, has turned optimistic, raising its target prices and upgrading its ratings for UMC and Vanguard to "neutral."

Morgan Stanley also increased its profit forecasts for Vanguard from 2024 to 2026 by 5%, 5%, and 15%, respectively. Vanguard’s new customers, like Qualcomm and power management IC company MPS,?are projected to drive by 10% to?20% of Vanguard's total revenue from 2025 to 2026.

Comment:

Despite competition from mainland counterparts, PSMC's gross margin is set to grow owing to better capacity utilization, narrowing price gaps, and slight improvements in memory prices.

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3.?Automotive Parts Inventory Clearance Evident as Southeast Asian Market Rise.

E-lead Electronics, specializing in heads-up displays (HUDs), driver safety protection, and multimedia rear-seat entertainment systems, experienced rapid inventory clearance in the second quarter. Xixun Chen, CEO and General Manager of?E-lead, noted that the recovery is robust in the Southeast Asian market, while the price war in the Chinese market is easing.

Chen highlighted that orders from Japanese car manufacturers in Thailand are climbing, which is boosting the company's rapid inventory clearance.

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In the Chinese market, despite fierce price competition, technological upgrades in smart cockpits have benefited E-lead's products.

Comment:

Chen mentioned that many car manufacturers are now focusing on improving product performance rather than just cutting prices, leading to increased orders for smart accessories like HUDs.

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4.?Toshiba to invest $640m in semiconductors with an eye to EVs, electric grid.

According to a top executive, Toshiba plans to spend roughly 100 billion yen ($640 million) in capital over the next three years to build up its semiconductor business. The Japanese industrial group has been pursuing?new growth since?going private.

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The company has also made strategic expansions in Japan and Thailand, including the opening of a new production line at an Ishikawa Prefecture manufacturing subsidiary, the expansion of a Hyogo Prefecture semiconductor plant near?Osaka, and the upgrade of a processing facility in Thailand’s PrachinBuri Province.

Comment:?

As generative AI and net-zero carbon emission goals progress, the power infrastructure business also sees new opportunities. Toshiba is slated to continue strengthening its investments in power infrastructure to meet the rising?electricity demand.

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5.?Broadcom's AI Business Booms with 280% Surge in Q2 Revenue.

Broadcom AVGO reported second-quarter fiscal 2024 non-GAAP earnings of $10.96 per share, beating the Zacks Consensus Estimate by 1.58% and increasing 6.2% year over year.

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The company projects its annual revenue to reach approximately $51 billion, higher than analysts' estimate of $50.6 billion and Broadcom's earlier prediction of around $50 billion.

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Net revenues increased 43% year over year to $12.48 billion, surpassing the Zacks Consensus Estimate by 3.71%. The upside can be attributed to VMware, which contributed $2.7 billion in revenues for the second quarter, up from $2.1?billion in the prior quarter.

AI-related revenues surged 280% yearly to $3.1 billion, a major driver of overall revenue growth.

Comment:

Broadcom also mentioned that its non-AI product business, which had been sluggish, rebounded in the second quarter. It is estimated to be a potential modest recovery in the second half of fiscal 2024.

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