Key points
- Silicon Motion designs and develops NAND flash memory controllers and provides mobile, data center and enterprise storage solutions.
- The boom in artificial intelligence is driving demand for NAND flash memory with its fast data access and storage capabilities.
- Silicon Motion faces stiff competition in the NAND controller market from Samsung, Micron Technology and Western Digital.
- 5 stocks we like better than Silicon Motion Technology
Silicon Motion Technology Co. NASDAQ: SIMO is a fabless semiconductor company in the computing and technology industry specializing in the design and development of NAND flash memory controllers. Controllers allow solid-state drives (SSDs) to run smoothly by managing communications between the NAND flash memory and the computer system. The artificial intelligence (AI) boom is driving insatiable demand for memory chips, particularly Micron Technology Inc.’s nonvolatile NAND flash memory. NASDAQ:MU used in SSD devices by giants like Seagate Technology PLC NASDAQ:STX and Western Digital Co. NASDAQ:WDC.
Positive demand drivers driven by artificial intelligence
The AI revolution has spurred demand for high-speed storage solutions. SSDs are seeing huge demand as AI models need oceans of data to train them. Not only does AI require data capacity, but high-speed access and transfers are a necessity. NAND memory is non-volatile, meaning it can retain data without power, unlike volatile memory like DRAM, which loses data once the power is turned off. Silicon Motion makes most of its revenue from SSD controllers.
It also generates revenue from mobile storage used on tablets, smartphones and mobile devices. These devices use data embedded in universal flash memory and USB flash drives. Silicon Motion’s Enterprise and Data Center Solutions segment provides storage solutions that meet your big data analytics and cloud computing needs.
Strong competition in the NAND Flash market
Silicon Motion has strong competition in the NAND flash memory market. Its three main competitors are Samsung Electronics Co. Ltd. OTCMKTS: SSNLF (which has massive scale as a developer of its own NAND flash memory semiconductors and flash controllers), Western Digital (whose SanDisk division makes it a threat in the NAND market), and Marvell Technology Inc. NASDAQ: MRVL (specializing in NAND storage controllers for enterprises and data centers).
Future competition
Demand for rapid storage and access to data has fueled a race to usher in the next big storage technology. Although HDDs are much cheaper and have much greater storage capacity, the moving parts make them much slower and clunkier than SSDs. Resistive RAM, or ReRAM, is a promising technology that allows for faster data write times, greater endurance, and lower power consumption. Micron Technology and Samsung are two pioneers who are currently in the research phase of ReRAM technology. It hasn’t materialized yet, as companies are still trying to assemble a prototype.
Bull daily banner
The SIMO daily candlestick chart illustrates a bull flag breakout pattern wavering from a pullback to support the bull flag low at $74.66. Shares have triggered a spike to a high of $83.96, but the pullback threatens to break through the bull flag low. The daily relative strength index (RSI) has fallen above the 50 band. The pullback support levels are located at $74.66, $71.07, $67.43, and $62.68.
Solid quarterly EPS beat per share
Silicon Motion reported fourth-quarter 2023 earnings per share of 93 cents, beating consensus estimates by 20 cents. Revenue grew 0.8% year-over-year and 17% quarter-over-quarter to $202.38 million, beating consensus estimates of $196.52 million. Sales of eMMC+UFS controllers increased 25% to 30% quarter-over-quarter and 20% to 25% year-over-year. SSD solution sales fell % to 10% quarter-over-quarter and 45% to 50% year-over-year. The company announced an annual cash dividend of $2.00 per ADS. Non-GAAP gross margins were 44.1% and operating margin was 13.8%.
Full-year 2023 non-GAAP net sales fell 32% year-over-year to $639.1 million, generating an operating margin of 11.9% and earnings of $2.27 per 2-diluted ADS, $27.
Bullish guidance
Silicon Motion gave upward guidance for first-quarter 2024 revenue of $172 million to $182 million versus consensus estimates of $169.19 million. Non-GAAP gross margins are expected to be at the high end of original estimates of 44% to 45%. Full-year 2024 revenues were on track between $765 million and $800 million versus consensus estimates of $767.72 million.
CEO Insights
Silicon Motion CEO Wallace Kou said: “Our fourth quarter results exceeded expectations as demand for most of our products increased sequentially, driven by holiday demand and inventory normalization of the channels”.
Kou concluded: “Demand for both eMMC+UFS and SSD controllers grew strongly in the quarter. We are confident that our teams’ ongoing commitment to providing controller solutions that enable our customers to serve a broader range of markets will continue to generate share gains for us.” and form the basis for strong growth in 2024 and beyond.”
Silicon Motion analyst ratings and price targets I’m on MarketBeat.
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