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Rethinking the Technology Sector - Silos, Platforms, Clusters & Pipes
July 10, 2012
One key to investing in the technology sector is understanding the relationships among companies along the value chain. Traditional sector classifications are based on hardware, their constituent components, and software. However, these say nothing of how companies relate to one another. Rather than focus strictly on products, four constructs which better illustrate the relationship between companies are Silos, Platforms, Clusters & Pipes.

Windows Phone 8 Review - The Elixir of Delight
February 21, 2013
The market is greatly underestimating Windows 8, which is fresh, fun, stable, well thought-out, innovative, and falls short of Android and iOS in very few areas, while surpassing them in many. Most of all, it has the secret ability every product desires, the ability to delight.

Investment Letter – Big Data Times

Sunny’s Modular Margin Deterioration

August 20, 2014
Sunny's July shipments cooled off after a blistering June. Although 1H14 net income was in-line with expectations, operating profits fell short due to an alarming drop off in module margins. Although, Sunny remains sunny about margins recovering as resolutions rise in 2H14, it hasn't helped so far.… More

Lenovo has Upward Mobility

August 15, 2014
Lenovo surprised the street with stronger than expected profitability in its mobile business in FY1Q15. With PCs strong, and the Motorola and IBM server business on-track to close by year end, multi-year earnings growth now looks assured.… More

Compal Makes Lite of Being Light

August 13, 2014
Compal's 2Q14 earnings came in about in-line with the street although slightly shy of GTI's forecast due to gross and operating margins which were a little light. Somewhat strangely, Compal hasn't addressed the press or the investor base about results or guidance, potentially raising a red flag. Despite this, top-line growth remains on track and margins still have the potential to improve as the sales mix continues shifting.… More

Catcher Rides Bucking Apple Bull

August 11, 2014
Catcher smashed consensus with gross margins which beat by almost 700bps on high utilization and favorable pricing. Looking into 2H14, the street was already expecting strong top line momentum, but with the better than expected 2Q14 margins, forecasts for full year 2014 are likely to go up.… More

Compal’s Down Still Up, TSMC Preps for Holidays, Asus Gets on Phone

August 8, 2014
Compal's July revenue inflected down from a high base in June, but Compal reiterated its 3Q14 notebook guidance and said August and September will both be up. TSMC showed signs of beginning the holiday ramp with a strong July which was in-line with its guidance. Asustek's July was somewhat stronger than expected on smartphone shipments up 30% MoM. However, with total smartphone shipments still small, they'r unlikely to add much to profitability.… More

Novatek a TV Star, Mediatek Forgoes Summer Vacation

August 7, 2014
Novatek beat 2Q14 forecasts and gave stronger than expected 3Q14 guidance driven by strong SoC and mobile panel driver shipments. In addition to continued market share gains, Novatek is benefiting from the rising adoption of 4K2K. Mediatek reported very strong July revenue, and with 3G still going strong in export markets and 4G traction stronger than expected, growth remains on track.… More

Largan has More to Come, Catcher Raises Bet, Apple Approaches Due Date

August 5, 2014
Largan and Catcher both reported flattish revenue in July, but can expect momentum to return deeper into 2H14 as they ramp production for Apple's new product launches. Apple's premier of the iPhone 6 is suspected of being just around the corner.… More

HTC Sells its Soul to the Ad Man

August 4, 2014
HTC's sales dropped like a rock in July, falling 51% QoQ and 32% YoY. With the party for the M8 now over, HTC doesn't have much of  plan to rejuvenate sales other than to lower prices and increase marketing expenses. Although volumes may receive a boost, margins look destined to once again vanish into thin air.… More

Samsung Shovels DRAM into Earnings Hole

August 1, 2014
Samsung's handset margins finally started to crack in 2Q14, with the operating margin of the IT and Mobile division falling 430bps QoQ to 15.5%. Unfortunately with competitors skating along break-even, handset margins have further to go. As Samsung scrambles to make up the deficit by growing other products, the only area where profits are still healthy is DRAM.… More

Mediatek Eats the Market from Bottom Up

July 31, 2014
Mediatek met 2Q14 expectations but gave better than expected 3Q14 guidance and raised its full year smartphone baseband shipment target. Mediatek is surfing the market share gains of its customer base which dominate the low-end in China and other emerging markets. It's lagging edge 4G solutions are fairing better than expected, and are poised to reclaim the pole position in China as the new designs roll-out in 2015.… More

Delta Slowly Bakes a Post-PC Pie

July 29, 2014
Delta's 2Q14 fell short of GTI's forecast, but beat consensus by 5%. The outlook for 2H14 remains unchanged, with growth driven by Cyntec's passives for Apple, telecom power supply and industrial automation. Although the counter is pricey, fundamentals are improving as the product mix shifts towards higher margin businesses. In addition, like many others in Asia, Delta will ride on Apple's long coat tails into the holiday season.… More

Apple Shows Warts but Keeps Beauty Crown

July 23, 2014
Apple's June quarter hit the mark, coming in-line with consensus, mainly due to gross margin which was 190bps above the midpoint of Apple's guidance. Although iPhone and iPad shipments disappointed, growth is expected to return in spades in late CY3Q14 as the iPhone 6 and 13" iPad are launched.… More

Company/Strategy Reports

TSMC Meets the Fruit Ninja
July 18, 2014
Comments out of TSMC and ASML have clouded the outlook for foundry growth and brought into question TSMC's Apple business beyond the A8. With utilization set to peak in 3Q14, and inventory at or above seasonal levels, 2014 will be a hard act to follow next year.
2Q14 Strategy: The Road to One
April 21, 2014
The tech food chain is gearing up for Apple's latest bushel of new products, which according to whisperings out of Asia have the potential to reorganize both the mobile and PC market. At the same time, the smartphone market is grappling with its new slow growth reality.
Model Portfolio - 1Q14
April 19, 2014
ARM Sells More of Less
February 7, 2014
ARM's end markets continue to grow quickly in unit terms, but the average value of semiconductor content per unit is falling causing ARM's royalty growth to decelerate rapidly. Although solid earnings growth awaits driven by the continued growth of mobile and non-mobile devices, including the internet of things, the counter warrants a lower valuation more suitable for its slowing growth prospects.
GTI’s 2013 Year in Review – Smartphones Jump the Shark
January 3, 2014
21 longs were up 30.1% since initiation with an average holding period of 316 days and an annualized return of 41.5%, and 18 shorts were down 6.9% since initiation with an average holding period of 358 days and an annualized return of up 10%.
CES 2013 – Six Major Trends Emerge
January 17, 2013
The show had a noticeably sleepier feel than last year, with seemingly less attendees and exhibitors. Even so, six major trends for 2013 emerged including rising resolutions, touch everywhere, W8’s latent potential, the return of integrated mfrs, Intel’s challenges, and HTC’s absence.
More Inside …

Model Updates

Sunny Model Update
August 20, 2014
2014 and 2015 EPS raised by 4.8% and 1.7% to RMB0.50 and RMB0.58.
Lenovo Model Update
August 15, 2014
Raising FY15 EPS 1.6% to HK$0.76 and introducing FY16 EPS at HK$0.91.
Compal Model Update
August 13, 2014
2014 and 2015 adjusted EPS lowered 7.4% and 2.7% to NT$2.23 and NT$2.59.
Novatek Model Update
August 7, 2014
Raising 2014 and 2015 EPS 3% to NT$11.32 and NT$12.62.
HTC Model Update
August 4, 2014
2014 and 2015 revised to NT$0.57 and -NT$1.48.
Samsung Model Update
August 1, 2014
Lowering 2014 and 2015 EPS by 8% and 10% to KRW 182,075 and 168,540.
More Inside …