Following weeks of negative headlines, the chip industry has received some encouraging ones over the last 24 hours.
First, on Monday afternoon, Cypress Semiconductor (CY) - Get Cypress Semiconductor Corporation Report disclosed that the Committee on Foreign Investment in the United States (CFIUS) had concluded that Cypress’ planned $8.7 billion sale to German chipmaker Infineon Technologies posed no national security risks. The announcement came just a few days after Bloomberg reported that CFIUS was recommending that the Trump Administration block the deal due to unspecified national security concerns.
Cypress’ stock, which plunged last Friday following Bloomberg’s report and added to its losses amid Monday’s selloff, is up 48.5% in Tuesday trading to $22.70, leaving it $1.15 below Infineon’s buyout price.
Mellanox Technologies (MLNX) - Get Mellanox Technologies, Ltd. Report, which last March struck a $6.9 billion ($125 per share) deal to be acquired by Nvidia (NVDA) - Get NVIDIA Corporation Report, also appears to be getting a lift on the news: Its shares are up 5.8% to $113.70. Chinese regulatory approval is the last remaining regulatory hurdle for both the Infineon/Cypress and Nvidia/Mellanox deals.
Separately, on Tuesday morning, South Korean analog and mixed-signal chipmaker MagnaChip Semiconductor (MX) - Get MagnaChip Semiconductor Corporation Report hiked its Q1 guidance. Citing “stronger-than-expected demand,” MagnaChip now expects Q1 revenue of $187 million to $197 million (up 22% annually at the midpoint), after having set a Q1 sales guidance range of $180 million to $195 million in its Feb. 19 Q4 report.
MagnaChip’s stock is up over 8% in Tuesday trading. Given MagnaChip’s location and its heavy reliance on sales to Samsung and other Korean OEMs, its guidance hike is an encouraging sign for chip demand and manufacturing activity within a country that has seen a major COVID-19 outbreak, but (with the help of aggressive countermeasures) has seen the number of newly-reported COVID-19 cases slow in recent days.
MagnaChip’s announcement also comes amid signs of improving Chinese manufacturing and chip supply chain activity, as the number of new COVID-19 cases drops in the country where the outbreak originated. Last week, AMD (AMD) - Get Advanced Micro Devices, Inc. Report CEO Lisa Su said that her company is back to “near-normal” supply chain capacity, following disruptions earlier in the quarter.
Tuesday morning also saw Taiwan Semiconductor (TSM) - Get Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR Report, which prior to the COVID-19 outbreak was seeing booming demand amid strong orders from AMD, Apple (AAPL) - Get Apple Inc. (AAPL) Report and a slew of other chip developers, report better-than-feared February sales. TSMC reported February revenue of NT$93.39 billion ($3.12 billion), down 9.9% from January but up 53.4% annually. Its shares are up 4% today.
Finally, though only time will tell if this outlook proves accurate, Taiwan’s Digitimes reported (citing industry sources) that DRAM and NAND flash memory contract prices are expected to see double-digit sequential growth in Q2. With the help of major capex cuts that have yielded a more favorable supply/demand balance, NAND and (to a lesser extent) DRAM pricing trends have been improving in recent months.
None of these developments preclude chip demand from falling in the coming weeks in the event that COVID-19's spread in the U.S., Europe and elsewhere has a major impact on global consumer and business spending. But they do collectively act as a reminder that things aren’t as gloomy for the chip industry right now as some headlines might lead one to think.