SWKS - My Mid-Quarter Review

SWKS - My Mid-Quarter Review

Who is Skyworks? .
SWKS was founded in 1962 and is headquartered in Massachusetts. They design and manufacture their own complex analog semiconductors that power wireless connectivity in everything from smartphones to medical devices. They are sometimes lumped as an “Apple supplier” but they sell their chips to just about every smart phone manufacturer there is, and their products are in almost every model produced by every manufacturer. They are also expanding into the Internet of Things and are in automobiles, smart homes, etc.

What is your history with them? .
I’ve been a stockholder for roughly 19 months now. They are my second largest position, and have been one of my top three for a long time. My SWKS position size is probably larger than it’s prudent to have for a position in any one stock. Yes, I’m aware of that.

Don’t chip manufacturers become commoditized? .
Yes, that usually happens because competitors make cheaper competing products, causing the company’s margins to fall and fall. Skyworks has taken a different route, however and have become a “Master of Complexity”. They plan with the manufacturer from six months to two years ahead of time what the manufacturer wants and needs in a future model, and then Skyworks combines multiple functions in the same chip. They make themselves indispensible to the manufacturer. Their gross margins have been rising consistently, not falling. They had set a medium range goal of 50% gross margins but have already surpassed that so they have raised their goals to 55%. Their operating margins were 39.6% last quarter. Does that sound as if they are being commoditized? .

Here’s what the CEO said when asked how margins will stay strong in a weak smart phone environment:
"It’s relatively simple. It isn’t a year-over-year, part-to-part comparison. We are increasingly integrating more functionality as these devices get more complex, and we’re seeing fewer competitors able to do it. Customers can’t handle discrete components any longer, nor the level of integration required to have a product:

that consumes low current,
that is small,
that is highly integrated,
that requires many, many different functional blocks with process technology know-how pulled together in a low-cost manufacturing platform with great system architectures.

So, we are able to work with our customers to give them a differentiated system performance which is increasingly becoming analog and RF-dependent. Less digital and more analog and RF-dependent. And, that’s our sweet spot. And so, its not as if we’re charging our customers more per function, it’s that they’re giving us more of the system. And, they’re paying us for it because we add a great deal of value for them."

It amazes me how many people still don’t get it!

How does this benefit their customers?
In the past, as I understand it, the customer (phone manufacturer XYZ) had to buy, let’s say five commodity chips, for five functions, from different manufacturers, and then XYZ’s engineers had to figure out how to make them work together in the best way to do what XYZ needed. Now, XYZ works in advance with SWKS (who already knows a lot about what XYZ wants from working with XYZ on earlier models), plans ahead for the next model, and then the complex chip arrives. It combines all five functions in advance so they work together, it’s smaller (important), uses less power (very important), and it’s cheaper than buying five separate chips (I think). All in all, this is a very important relationship for XYZ.

Can’t they just be designed out of the next model in a few weeks if someone else comes along with a cheaper chip?
You’ve got to be kidding! Did you read the paragraph above?

But how can they keep 50% gross margins and rising? Why don’t the phone manufacturers pressure them to cut margins?
Because the phone manufacturer is getting a tremendous bargain and benefit. They don’t have to have engineers trying to jerry-rig the integration of five different functions at the last minute. They get them all on one chip, and it’s smaller, less energy consuming and cheaper. If someone came along and said “We’ll sell you a chip that can do function three for 15 cents cheaper,” they’d laugh at them. Company XYZ simply doesn’t care how much money SWKS is making because SWKS is saving XYZ a lot of time, energy, money and headaches. (That’s how I see it anyway).

One problem is that smart phone sales are slowing down, especially iPhones. However they are in all the smart phone manufacturers, and lots of people in China and elsewhere are still upgrading from 2G and 3G to 4G. Skyworks acknowledged that growth would slow next quarter, but said that they’d be off to the races in the second half of the year.

If they are already in all the phone manufacturers, where do they go from here?
First of all, they get more content in each new phone model. For example if their chip is already performing five functions, they may say to XYZ, we can tie in function six in our next chip and you won’t have to buy that commodity chip six separately and integrate it yourself. How can the manufacturer of chip six compete against that offer? Say they’ll cut 10 cents off the price of the chip? Who cares?

Second, their most rapidly growing area is the Internet of Things, which is just starting out.

How has SWKS stock been doing?
Let’s see. I initially bought 16 months ago at $52. Eight months ago they were at $112. Since then they’ve fallen as low as $55 and they are now at $57 something with an adjusted PE of 10.3 !!!

Wow, they are almost 50% off the high. And with a PE of down to 10 they must be doing terribly!
Yes, they are only growing their trailing 12-month earnings by 46%. It’s terrible! Let’s see, why did the price drop so much in the last five months? Well for the June, Sept, and Dec quarters, their revenue was only up 38%, 23%, and 15% year-over-year, and 6.2%, 8.8%, and 5.2% sequentially. And for the same three quarters, their adjusted earnings were only up 61%, 36% and 27% year-over-year, and 16.5%, 13.4% and 5.2% sequentially (!!!) And this is when the other chip makers have been crying nbitter tears about cut-backs and falling revenues and earnings.

Their (GAAP) gross margin percentages for the past nine quarters have been:
43.9
44.2
45.0
45.1
46.3
46.2
48.5
50.0
50.9

Does that look to you as if they are being commoditized?

They had had a goal of making $7.00 a share by 2017, and they just raised it to $8.00. During 2015 they’ve doubled their quarterly dividend from 13 cents to 26 cents.

No wonder they fell to a PE of 10.3.

How else do they reward shareholders?
They have a policy of paying out at least 40% of free cash flow to stockholders in the form of dividends and stock buybacks.

I’d heard were trying to acquire another company?
Yes they were trying to acquire PMC-Sierra, but another company kept trying to outbid them and PMC-Sierra accepted the other company, in an attempt to make Skyworks keep raising their bid. Instead, SWKS walked away with the $85 million earnest money (which is added to GAAP results but not adjusted, as it is definitely a one-time deal).

To summarize, here’s an excerpt from a great post by othalan on our board which explains SWKS advantage:
"Computers are digital, however many inputs and outputs are analog. Any wireless communication is an analog signal (WiFi, cell phone, AM/FM radio, etc.). Even digital wireless signals (e.g. 4G) use an analog signal for transmission (e.g. 1900 MHz).

Processing analog signals (such as the 4G signal coming into an iPhone) requires a minimum amount of analog circuitry to convert the signal into digital data. A lot of signal processing can only be done on the analog signal before it is converted to digital. Even with operations that could be handled after the digital conversion, analog signal processing frequently offers many benefits. The drawback to analog signal processing is that it requires more expertise. This expertise has always been somewhat rare but is far more rare in today’s digital world

This is where Skyworks comes in with their analog expertise. Because analog signal processing is a lot more difficult (compared to digital) not many companies bother with building up the needed expertise, especially if they are primarily interested in digital data. Skyworks not only provides this expertise but also integrates a large amount of analog circuitry in prepackaged IC (integrated circuit) chips. The result is that their customers (like Apple) do not need any analog expertise, do not need to figure out how to integrate multiple analog chips, and can trust that the incoming digital signal is high quality ready for use. [I’d suggest you go back and re-read this paragraph]

SWKS has every earmark of what Buffett would call a durable competitive advantage (at least, to the best of my limited understanding - othalan). I see this expertise in analog circuitry, combined with their market positioning, as the source of this durable competitive advantage."

My kind of company!

Saul

For Knowledgebase for this board
please go to Post #15056.

A link to the Knowledgebase is also at the top of the Announcements column
on the right side of every page on this board

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Thanks for another great write-up Saul. I would like to make two observations about SWKS that I think receive inadequate attention.

First, a rather simple marketing point. The Chinese phone retailers do not generally market phones that exceed the available communications technology of the region. In simple terms, if a given geographical region is served predominantly with 3G transmission technology, the phones sold in that region will not support 4G. This is just a matter of price competition. 4G capable phones cost more but offer the customer no functional advantages. At present, China is in the early stages of 4G deployment. This provides a tremendous opportunity for market expansion which will benefit all the device manufacturers. As noted by Saul, SWKS holds just about all the major H/W makers as customers, so they benefit irrespective of whether Samsung, Apple, Huawei or others vie for share.

The second point that I think vitally important regarding SWKS competitive advantage which is routinely overlooked is that integrating multiple analog functions with very low signal strength in hostile digital signal environment is not just a challenging design problem, it poses extraordinary manufacturing problems requiring a high degree of knowledge, experience, and some would say witchcraft. Interference, interactions, coupling, shielding, cancellation, resonance, feedback loops, etc., and so forth.

Designing these chips with integrated analog functions is significant accomplishment. Building them is yet another achievement providing SWKS with a competitive advantage which is generally ignored by the “experts.”

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Saul, I entirely share your admiration for SWKS but that it has ‘every earmark of what Buffett would call a durable competitive advantage’ is definitely a claim too far.

We can describe it thus, but for Buffett, ‘durable competitive advantage’ lies in, say, regular-purchase food and drink brands having the acclaim of the nation where the holding time might be ‘forever’, not, ahem, integrated analog-digital conversion circuitry chips. I doubt if SWKS would occupy his attention for even a nanosecond.

However, he would likely be much more interested in SKX and LGIH.

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That’s what makes this board so interesting.

First we have BrittleRock making a brilliant comment about SWKS’s expansion opportunity, and about the magic and witchcraft involved in what they do, which gives them a huge moat and competitive advantage.

Then we have streina making the valid points that Buffet doesn’t invest in technology, and that no technology stock is forever in the sense that Coca Cola might be.

By the way, while Buffet might not consider a tech stock like SWKS for a second because (as he acknowledges), he doesn’t understand the technology, I have to agree with othalan and Brittlerock that that doesn’t stop Skyworks from having a “durable competitive advantage”.

“Competitive advantage” certainly, and “durable” in the sense that it will last and increase as long as our current analog/digital technology lasts.

Thanks to all of you for your participation.

Saul

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Saul, I entirely share your admiration for SWKS but that it has ‘every earmark of what Buffett would call a durable competitive advantage’ is definitely a claim too far.

strelna, Thank you for your comment! I originated the durable competitive advantage comment so let me expand on my thinking. Maybe I am wrong so please feel free to give a counterpoint to my view.

First, here is a statement from Buffett in 2005:

**Q:**I have worked in various technologies businesses, but I understand that you do not typically invest in the technology sector. Why is that? How do you view technology as an individual and as an investor?

A: Technology is clearly a boost to business productivity and a driver of better consumer products and the like, so as an individual I have a high appreciation for the power of technology. I have avoided technology sectors as an investor because in general I don’t have a solid grasp of what differentiates many technology companies. I don’t know how to spot durable competitive advantage in technology. To get rich, you find businesses with durable competitive advantage and you don’t overpay for them. Technology is based o­n change; and change is really the enemy of the investor. Change is more rapid and unpredictable in technology relative to the broader economy. To me, all technology sectors look like 7-foot hurdles.

Source: 2005 Tuck School of Business Trip to Omaha
URL: http://www.thinkfn.com/wikibolsa/Visita_a_Warren_Buffett

I agree that Buffett would likely never invest in SWKS. But that is because it is a technology company, not necessarily because it lacks a durable competitive advantage. I, unlike Buffett, have a lot of expertise that can be used to evaluate technology companies. Here are some points on why it seems to me SWKS has a durable competitive advantage.

Skyworks (SWKS) Durable Competitive Advantage

SWKS financials all point to a durable competitive advantage. In summary:

Non-GAAP Gross Margin (FQ1 2016): 51.4% (46.7% GAAP) and rising
SG&A Expense: 10.95% of Gross Profit and falling
R&D Expense: Significant and rising
Debt: None
Revenue: Positive and increasing
Net Earnings: Positive and increasings

But financials alone are not enough. Now look at the business.

SWKS integrates complex analog functionality into integrated circuit chips. This process requires a very high degree of engineering and manufacturing expertise which very few companies possess. Benefits to their customers include cost savings, power savings, decreased size, and increased quality. Benefits to end users (and thus profit for SWKS customers) include better RF signals in an increasingly challenging environment (lots of other devices nearby, faster speeds, etc.).

SWKS holds 25 patents protecting their technology.

SWKS products are used in most cell phones already and can still provide more integrated functionality for most of those phones. SWKS products are also used in an increasing number of IoT devices. This shows a sustainable market with room for growth.

All of this says to me: durable competitive advantage! Any company which wants to challenge SWKS, including the pending Qualcomm-TDK partnership, likely has a minimum of 2 years before they can even begin to challenge Skyworks. Meanwhile, every indication is that Skyworks will continue to research better products, gain more customers and generally grow their business.

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I suppose the ultimate proof of their advantage will come when the Qualcomm-TDK partnership starts producing product. If that product is me too catchup then the advantage is durable and real. If that product is superior, then the advantage was illusory.

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I suppose the ultimate proof of their advantage will come when the Qualcomm-TDK partnership starts producing product. If that product is me too catchup then the advantage is durable and real. If that product is superior, then the advantage was illusory.

Tamhas, I can agree with that! It certainly is a concern to me, though I still think that risk is minimal.

Qualcomm-TDK not only has to match SWKS expertise, they need to provide a compelling reason to move away from a known high quality solution (SWKS). While that might sound easy in theory, SWKS is continuing to build brand name recognition as someone who is highly successful at a known difficult task.

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I’m reading more on Buffett, the technology sector and his idea of durable competitive advantage. One interesting bit that stands out to me today which I had previously missed is that Buffett finds it difficult to determine if a technology company has a durable competitive advantage early enough to invest at a reasonable price.

Looking at SWKS, I can really understand this! SWKS has spent decades working with analog integrated circuits, however it has only been nine years since there has been any demand for the level of complexity SWKS now specializes in (since the first iPhone). But most of that time was spent building up its competitive advantage and building reputation.

If not for the current price drop because of general market problems we may never have seen an entry point for investment that looks attractive as we have today. And even now, there is still worry that we have not invested early enough, even at this good a price, as seen by discussions here about how much growth is possible.

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From the last conference call:

David Aldrich
So with respect to the first half of the question, I think you’re absolutely right, that TDK and Qualcomm have been working closely together and fielding designs for a long time. We’ve competed very successfully against those designs. So there hasn’t been a lot of traction in the sweet spot of what we do. There have been other RF360 components of that system, in which we don’t compete, where they’ve had success. But these decades of gallium arsenide performance and driving switch technologies, and multichip module technology, and beginning to put our own high-performance filters, has really given us a system-level performance that has not been easy for competition to replicate.

We know TDK very well. We’ve used them in the past in mostly SAW. They’ve got some limited capability in BAW. But remember, I think as your question alluded to, our customers are wanting business based purely on performance and on configurability and what it does at the system level. And we have a clear advantage at the system level over anybody. We’ve not seen the combination of Qualcomm TDK to be any meaningful threat over the last three years.

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It is true that Buffet does not invest in technology, as it has too much uncertainty for his taste. But he did make an exception and invested in IBM. He said then (I can’t find his exact quote)that IBM was more of software services company with IBM embedded in critical functions of fortune 500 companies. Over the years they have built deep relationship and in depth knowledge of customers processes. Several Berkshire companies depend on IBM. This is a very sticky business which is hard to dislodge with high entry barriers.

Now think of SWKS and what it does. It looks like IBM with even more niche skills. Analog circuits are hard to design and an art is a known fact.It is deeply embedded in early design phase providing customized solutions with expertise hard to find and replicate. It will not be easy for Apple or anybody to just replace them overnight. They will have to plan it over years. As long as SWKS cost is a fraction of the total cost, I do not see an incentive for the OEMS to plan to displace them.

It does look very much like a Buffet stock to me.

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Saul,
once again thanks for porting. It is clear and concise. You are extremely kind to do this.
I have 1 question. are you not concerned by the decreasing rate of growth of earnings and revenue over the last 3 quarters?
usha

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Othalan, the difference in your claim of durable competitive advantage for SWKS lies only in tax-free compounding time. In your final para. you note the company likely has a minimum of 2 years before it might be challenged by a competitor. Buffett would substitute ‘only’ or ‘a mere’ for ‘a minimum of’!

To take an extreme example, which vehicle would give you the better total return over the next 30 years, SWKS or KXI (a global consumer-staples ETF)? It might be SWKS but my money would be on KXI.

But ask a different question: might several (or many) vehicles like SWKS greatly enhance the 30-year return of KXI? Yes, I think so, providing you are disciplined. And just as long as you don’t assume any of them had a ‘DCA’ to rival must-have baby products, toothpaste, drinks and food. That is why we are all here! (Thank you Saul.)

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strelna, interesting point. Thank you for the feedback. Perhaps a tech stock simply cannot be evaluated in the same way as Buffett would evaluate a company. Its impossible to look 30 years ahead in a company like SWKS because technology is changing so fast.

SWKS is currently ahead of the changes in technology for its current products. But can they stay there? Perhaps that is a better question to ponder when considering SWKS potential in the 10 - 30 year timeframe.

Thinking on this a bit now, it seems to me they certainly have a solid basis for continuing innovation. But it will depend a lot on how flexible management can be with new ideas. The current rise of IoT tech may give us an idea of how well SWKS can navigate entry into new technologies.

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Is Buffet making money on IBM? I don’t think so. IBM stock has not been that good since he bought it, has it? But I guess he has better deals than us he little guys.

Now SKWS: It is hard in the semiconductor sector to maintain any kind of competitive advantages. I am doubtful when people starts to talk about investing based on a ‘superior technology’ and/or expertise thesis. The numbers have looked good recently, and frankly good analog designers are difficult to find but from the business point of view of sustaining a competitive advantage, things can change very rapidly and sustainable advantage comes and goes. Yes, it could be a money making stock if you know how to play it. But from what I read here I feel there is a lot of hyperboles about its technology and expertise. There are plenty of competitors.

Brands like Coca Cola are indeed long lasting and seemingly stable but eventually they too will decline slowly maybe unlike tech stocks. In general tech stocks rise faster but drop faster too.

tj

But from what I read here I feel there is a lot of hyperboles about its technology and expertise. There are plenty of competitors

Not really.

There are only a few that I know of: QVRO, AVGO, and Murata. (I don’t know too much about the third).

And maybe QCOM in a few years. Maybe. Amazon’s and Facebook’s failed attempts to enter the smartphone market (and Blackberry’s second attempt) show that simply having 1) deep pockets and 2) a deep moat in a tangential business do not imply you can therefore enter a new business with high barriers to entry.

But let’s say that QCOM has some success with its JV. Then in a worst case scenario, you have five competitors. The likelihood of a sixth ever gaining scale in this area of RF/PA integration is close to zero. So it’s certainly not a commodity business.

I think many people fail to make the critical distinction with a tech business that basically sells discrete items, versus a business whose value is in the complex integration of dozens of disparate units. The second is where the barriers of entry lie.

I’d say it’s close to 100% certain that in fifty years, the world will be outrageously connected, and a very substantial portion of that will involve radio transmissions and other analog technology. Last I saw, no one had invented any new physics. So someone is going to be doing the complex integration required. And it’s not likely to be more than the five businesses above. I suspect that every single discrete item those businesses are using will be things unimagined at this time. But that’s not the point. Whoever the OEMs of that day are will require someone to provide the integration of those parts.

Now, there’s no guarantee for any single one of those five listed. Some may wither. Some may be acquired. Right now, Skyworks is certainly executing at least as well as any, likely better. But it is clearly within the realm of possibility that someone like QVRO could take major share from them. Maybe QCOM some day…though I see that as a long shot; it’s very tough to catch up to a target that is racing ahead so quickly. And as far as I understand it, AVGO really is more of a discrete provider than an integrator (but I may be wrong here).

So while I am currently holding a very large position in SWKS (second only to Berkshire), I am considering moving maybe a quarter of that position into QVRO and a quarter into AVGO, to hedge the bet. I think there is a good chance they can all do well: this isn’t inherently a winner-takes-all business (a la Google in search or Facebook in social networking), and oligopolies can be sweet for everyone…as long as competitors act rationally.

One last thing: as to whether or not Skyworks is a Buffett-like business, although I can’t imagine him actually buying SWKS, I believe the rationale for Skyworks is not too far off of his rationale for buying Precision Cast Parts (his biggest acquisition ever). I don’t know PCP well, but it basically makes parts for aerospace OEMs. At first blush, that sounds like a fairly commoditized business, and who’s to say that someone else won’t just come along and offer a better mousetrap? Well, what PCP is doing has taken them decades of work to develop, and is therefore very difficult to replicate. And they have very deep relationships and histories with their OEMs, working with them at early design stages to provide complex solutions to difficult problems, which are critical to the functioning of their products. Sounds an awful lot like Skyworks to me.

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To take an extreme example, which vehicle would give you the better total return over the next 30 years, SWKS or KXI (a global consumer-staples ETF)? It might be SWKS but my money would be on KXI.

I think one needs to distinguish between the Competitive Advantage Gap vs. the Competitive Advantage Period…as wonderfully described in The Gorilla Game.

It’s much easier to describe with pictures and graphs. Imagine a graph with free cash flow on the vertical axis, and time on the horizontal axis. What an investor wants is the maximum area under the curve. This is going to be a combination of CAG and CAP. A business with an unusually high CAG (e.g. Skyworks) can do quite well, even if the length along the horizontal axis is relatively short (this assumes, of course, that rational capital allocation continues to the end…rather than the business doing stupid stuff once is original strengths recede). On the other hand, a business with only modest CAG can also do well, as long as this persists for a very long time (this is the stuff Buffett likes, such as the railroad). It’s not an either-or situation.

I think a great illustration of this is Microsoft, with both Windows and Office. Those had outrageously high CAG. But they’re slowly fading, and will likely continue on that path. Yet they were still enormously worthwhile as investments.

It’s an interesting paradox to me, that on the one hand, many businesses (especially technology) are felt to be more risky and uncertain as people (e.g. Buffett) feel they just can’t see far distant into the future with those businesses. On the other hand, given that all future cash flows have to be discounted back to the present, it is precisely the nearest cash flows that are most valuable.

I think the worst situation is buying a technology business that isn’t generating much free cash flow now, with the hope that it will some time in the fairly-distant future. But when you have a business like Skyworks that is generating terrific cash flows (and return on invested capital) now, and you’re only paying 10X current earnings, that is a completely different matter.

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on suppliers of analog chips

http://pcsemicon.blogspot.com/2012/02/top-10-suppliers-of-an…

there is no long term sustainable competitive advantage for any of them. And not for SWKS . If you think long term means at least a decade. But the stock market does not think a decade ahead.

Linear Technology (LLTC) seemed to have a strong competitive edge in 2000 when it hit $55 or so. Despite decent business it is lower now 16 years later. But the P/E of SWKS is not sky high and I suspect it’s advantage will last a few years.

If I was going to buy the stock of a company and go away for 8 or 10 years I would think" who knows about the future but innovation is underway"companies like Tesla or Arcam , who probably will either be a lot bigger or broke by then. SWKS is a player in IOT, the other companies mentioned are at the heart of the innovation

Perhaps a tech stock simply cannot be evaluated in the same way as Buffett would evaluate a company
Agree. The Coke brand name added value 20 years ago adds value today and will still add value 20 years in the future unless they have their own version of Exon Valdez.

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Actually very high grade investment casting is done by only a few companies

http://www.ruger-firearms.com/casting/index.html
http://dailycaller.com/2014/10/06/casting-call-rugers-invest…
http://www.precast.com

Ruger owns one of the few capable of casting things like firearms receivers, where any tiny weakness or crack leads can lead to catastrophic failure. Ruger use of this process leads to firearms as strong as the competitors forged and machined parts but cheaper to make.

Up and coming in this world of these high quality metal parts is metal 3D printing done by laser or electron beam. For most uses these 3DP methodologies do not overlap, and have almost nothing to do with 3DP done in plastic. So in the not very distant future there will be precision casting, forging and CNC machining ,and 3D printing (additive manufacturing) each with their own niche for demanding products like aerospace, medical implants, fine firearms etc.

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Linear Technology (LLTC) seemed to have a strong competitive edge in 2000 when it hit $55 or so. Despite decent business it is lower now 16 years later. But the P/E of SWKS is not sky high and I suspect it’s advantage will last a few years.

They mostly make discrete chips don’t they (I may be wrong on this, I don’t follow them). If so, then this is completely an apples to oranges comparison.

on suppliers of analog chips

http://pcsemicon.blogspot.com/2012/02/top-10-suppliers-of-an…

there is no long term sustainable competitive advantage for any of them. And not for SWKS .

By grouping all of them simply as “suppliers” of “analog chips”, I think you’re missing what’s going on with businesses like Skyworks and QRVO. A decade ago, they were mostly selling discrete units, which various OEMs would then put into their products. All the value-add was with the OEMs. That has completely changed now, due to the incredible demands the modern smartphone is placing on both limited radio spectrum, as well as the need to do exponentially more without using more precious battery. There is a world of difference between the two.

But my investing in technology does not go back many decades. So maybe someone can educate me. What are some technology businesses that were doing such demanding integration of dozens of parts that only a few businesses had the capability of doing such integration?

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Up and coming in this world of these high quality metal parts is metal 3D printing done by laser or electron beam. For most uses these 3DP methodologies do not overlap, and have almost nothing to do with 3DP done in plastic. So in the not very distant future there will be precision casting, forging and CNC machining ,and 3D printing (additive manufacturing) each with their own niche for demanding products like aerospace, medical implants, fine firearms etc.

So do you think that Buffett just wasted $32 billion on a business whose prior competitive advantage will be displaced by new technologies??

Actually very high grade investment casting is done by only a few companies

Actually there are only a few companies who can do the kind of RF/PA integration that Skyworks is doing. I guess the question is what is inherently different about the two? Simply the word “technology”??

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