EQUITY RESEARCH INDUSTRY UPDATE August 6, 2021 Daily Chip Clips SUMMARY TECHNOLOGY/SEMICONDUCTORS & COMPONENTS ■ Highlights of the Day: Foxconn Buys 6-inch from Macronix (Digitimes) ■ Views from Taiwan (8): MediaTek Becomes Largest Supplier of Handset APs to Samsung (Digitimes) ■ With "Mega-Fab" Coming, Intel’s Gelsinger Promotes Chip Legislation (EE Times) ■ Report: Google Tensor Chip Will Use 5nm Process, Samsung to Manufacture (ExtremeTech) KEY POINTS ■ Macronix and Foxconn have signed an agreement for the memory maker to sell a 6-inch wafer fab to the EMS giant, enhancing the latter's development in the semiconductor sector. TSMC has raised its sub-7nm shipment outlook for 2021 and 2022, with prospects of Qualcomm and Nvidia placing major orders. Component shortages are improving, fueling optimism at Pegatron about its business in second-half 2021. ■ According to Digitimes research analyst Stella Weng's study, MediaTek's application processors (AP) were used in only 8% of Samsung's handsets in 2019, but the proportion shot up to 16% in 2020, with a chance of rising to 37% in 2021. The reason behind the rapid increase of MediaTek's share is related to the progress and yield rate of Samsung's 5nm/8nm nodes. ■ As the U.S. semiconductor industry awaits enactment of chip legislation that would among other things provide tax and other incentives to build domestic foundries, Intel Corp. is in the midst of negotiations to construct a U.S.-based “mega-fab” designed to revive American chip production. Intel CEO Pat Gelsinger said negotiations with local officials are ongoing, and the company expects to announce a U.S. site by the end of the year. ■ Google has been quietly hiring microprocessor engineers for several years, and the fruit of their labor is the new Tensor mobile system-on-a-chip (SoC). This chip will come in the new Pixel 6 and 6 Pro later this year, but Google didn’t offer any real hardware details on Tensor, except to say it’s based on technology from its Tensor AI server chips. A new report includes a few tantalizing details, though. Rick Schafer Andrew Hummel, CFA 720-554-1119 312-360-5946 [email protected] [email protected] Wei Mok 212-667-8387 [email protected] Disseminated: August 6, 2021 00:30 EDT; Produced: August 5, 2021 18:22 For analyst certification and important disclosures, see the Disclosure EDT Appendix. Oppenheimer & Co Inc. 85 Broad Street, New York, NY 10004 Tel: 800-221-5588 Fax: 212-667-8229 TECHNOLOGY / SEMICONDUCTORS & COMPONENTS Headlines Highlights of the Day: Foxconn Buys 6-inch from Macronix (Digitimes) Macronix and Foxconn have signed an agreement for the memory maker to sell a 6-inch wafer fab to the EMS giant, enhancing the latter's development in the semiconductor sector. TSMC has raised its sub-7nm shipment outlook for 2021 and 2022, with prospects of Qualcomm and Nvidia placing major orders. Component shortages are improving, fueling optimism at Pegatron about its business in second- half 2021. Reference Link Views from Taiwan (8): MediaTek Becomes Largest Supplier of Handset APs to Samsung (Digitimes) According to Digitimes Research analyst Stella Weng's study, MediaTek's application processors (AP) were used in only 8% of Samsung's handsets in 2019, but the proportion shot up to 16% in 2020, with a chance of rising to 37% in 2021. The reason behind the rapid increase of MediaTek's share is related to the progress and yield rate of Samsung's 5nm/8nm nodes. As the most cost-effective solutions, MediaTek's 4G chips are favorites for Samsung, which has been very demanding in cost requirements. Reference Link With "Mega-Fab" Coming, Intel’s Gelsinger Promotes Chip Legislation (EE Times) As the U.S. semiconductor industry awaits enactment of a chip legislation that among other things would provide tax and other incentives to build domestic foundries, Intel Corp. is in the midst of negotiations to construct a U.S.-based “mega-fab” designed to revive American chip production. Intel CEO Pat Gelsinger said negotiations with local officials are ongoing, and the company expects to announce a U.S. site by the end of the year. Along with necessary foundry infrastructure, including inexpensive power and plentiful water, the chip maker also wants to locate its new fab near a university. Reference Link Report: Google Tensor Chip Will Use 5nm Process, Samsung to Manufacture (ExtremeTech) Google has been quietly hiring microprocessor engineers for several years, and the fruit of their labor is the new Tensor mobile system-on-a-chip (SoC). This chip will come in the new Pixel 6 and 6 Pro later this year, but Google didn’t offer any real hardware details on Tensor, except to say it’s based on technology from its Tensor AI server chips. A new report includes a few tantalizing details, though. Reference Link 2 TECHNOLOGY / SEMICONDUCTORS & COMPONENTS Stock prices of other companies mentioned in this report (as of 8/5/21): Foxconn Technology Co., Ltd. (2354-TW, NT$63.2, Not Covered) Macronix International Co., Ltd. (2337-TW, NT$45.45, Not Covered) MediaTek Inc (2454-TW, NT$961, Not Covered) Samsung Electronics Co., Ltd. (005930-KR, KRW82100, Not Covered) Pegatron Corporation (4938-TW, NT$68.8, Not Covered) 3 TECHNOLOGY / SEMICONDUCTORS & COMPONENTS Disclosure Appendix Oppenheimer & Co. Inc. does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Analyst Certification - The author certifies that this research report accurately states his/her personal views about the subject securities, which are reflected in the ratings as well as in the substance of this report. The author certifies that no part of his/her compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in this research report. Potential Conflicts of Interest: Equity research analysts employed by Oppenheimer & Co. 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Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest. Important Disclosure Footnotes for Companies Mentioned in this Report that Are Covered by Oppenheimer & Co. Inc: Stock Prices as of August 6, 2021 Intel Corp. (INTC - NASDAQ, $53.89, PERFORM) Alphabet Inc. (GOOG - NASDAQ, $2,738.80, OUTPERFORM) QUALCOMM Incorporated (QCOM - NASDAQ, $146.83, PERFORM) NVIDIA Corp. (NVDA - NASDAQ, $206.37, OUTPERFORM) Rating and Price Target History for: Intel Corp. (INTC) as of 08-04-2021 70 65 60 55 50 45 40 2019 2020 2021 Created by: BlueMatrix 4 TECHNOLOGY / SEMICONDUCTORS & COMPONENTS Rating and Price Target History for: Alphabet Inc. (GOOG) as of 08-04-2021 07/23/18 10/29/18 04/30/19 07/25/19 10/29/19 02/04/20 02/07/20 03/27/20 04/16/20 07/31/20 10/30/20 02/03/21 04/19/21 04/27/21 07/27/21 O:$1450 O:$1435 O:$1342 O:$1370 O:$1530 O:$1620 O:$1670 O:$1465 O:$1445 O:$1685 O:$1800 O:$2250 O:$2350 O:$2510 O:$3000 3,000 2,500 2,000 1,500 1,000 500 2019 2020 2021 Created by: BlueMatrix Rating and Price Target History for: QUALCOMM Incorporated (QCOM) as of 08-04-2021 180 160 140 120 100 80 60 40 2019 2020 2021 Created by: BlueMatrix 5 TECHNOLOGY / SEMICONDUCTORS & COMPONENTS Rating and Price Target History for: NVIDIA Corp. (NVDA) as of 08-04-2021 08/17/18 11/16/18 01/28/19 11/12/19 02/11/20 02/13/20 05/22/20 08/17/20 08/19/20 10/05/20 02/17/21 07/09/21 07/20/21 O:$310 O:$250 O:$190 O:$250 O:$300 O:$350 O:$400 O:$500 O:$550 O:$600 O:$700 O:$925 O:$235 1,000 800 600 400 200 0 2019 2020 2021 Created by: BlueMatrix All price targets displayed in the chart above are for a 12- to- 18-month period. 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