Folks, I had an interesting conversation with mobile/IoT chip expert.
He is an architect for one of the leading high tech companies and is a close friend of mine.
He is also very smart (I think he is a genius) and has a lot of experience in the field.
He says that the most dominant company by far in this field in Arm Holdings.
By now he claims that Arm Holdings designs are a standard.
Engineers are used to their tools and development environment and are demanding from the chip makers to use ARM Holdings designs and tools.
So if there is a company that will benefit from IoT is ARMH.
In that contest SWKS has an uphill battle (if not impossible battle) with ARMH designs.
Conclusion:
IoT is considered to be one of SWKS growth drives. It is in serious danger when ARMH is the most promising (have a huge moat) in this field
I am watching ARMH and for me this is much better way to play both Mobile chips as well as Iot (when and if it will happen.) than SWKS.
I don’t understand this since ARMH and SWKS make entirely different products. They don’t compete in the slightest, particularly since SWKS focus is in analog processing and ARMH is entirely digital. The only possible competition, it seems to me, is someone deciding to use brute force digital in place of analog for a task where analog is actually better suited.
ARMH is a very long term holding for me and I think they are a great company which will have lots of continuing success in IoT and mobile … just doesn’t seem to have anything to do with SWKS.
Tamhas,
I don’t understand this since ARMH and SWKS make entirely different products. They don’t compete in the slightest, particularly since SWKS focus is in analog processing and ARMH is entirely digital. The only possible competition, it seems to me, is someone deciding to use brute force digital in place of analog for a task where analog is actually better suited.
I’m glad you confirmed my thinking here. I’ve never heard ARMH mentioned in the same sentence as SWKS.
Shuik - Do you feel differently?
Thanks,
A.J.
Shuik - Do you feel differently?
The name is Shuki .
I will have to get back to you. I will talk to my friend again and see what exactly he meant.
For sure he meant that ARMH is a better bet.
I have to confirm/ deny the analog/ digital separation pointed out here.
Best
Shuki
Hey now Shuki - sorry for the typo!
Just to be clear, I am not disagreeing that ARMH will be big in mobile, they already are, and big in IoT … they seem most likely to dominate the CPU for IoT devices. It is just not to the exclusion of SWKS since they do something entirely different. One imagines ARMH is the safer bet for one stock in the IoT space because it has already won, but it is also probably not the best candidate for a 10X gain, because it has already done that.
ARMH and SWKS make entirely different products. They don’t compete in the slightest
The Skyworks management and legal team agree. They don’t even list ARMH as a competitor in the 10-K.
Our competitors include Analog Devices, Avago Technologies, Linear Technology, Maxim Integrated Products, Murata Manufacturing, NXP, QUALCOMM and Qorvo.
OK - I don’t claim to be a genius, but I was an enterprise architect at a company with greater revenues than some country’s have GDP. My focus was much higher level than your friend’s. I was focused on how the applications of the enterprise interacted and the flow and life-cycle of information. And I will also admit that since I retired 5.5 years ago my skills have grown a bit stale and a lot has changed in the IT landscape.
But some things are relatively constant. As noted by other posters here, there is very little common ground between the digital and analog world. So, I’m not sure how familiar your friend is with SWKS, but as far as I can see there’s virtually no overlap between ARM holdings and Skyworks Solutions.
A summary of SWKS products can be found here: http://www.skyworksinc.com/ProductsLanding.aspx
A similar page for ARMH is here: https://www.arm.com/products/index.php
A cursory review will reveal that the two companies actually compliment one another rather compete.
The missing piece (not covered by products from either company) is sensors. The world of sensory perception is analog. Sensor output may be either analog (such as microphone that converts sound pressure variation to voltage variation). Sensors may also have a built-in A-D converter. A number of different companies are players in this arena, I don’t think any one of them can be declared the standard bearer.
The other thing to keep in mind is when talking about technologies, one has to be very cautious about designating one company as dominant. Dominance is often a fleeting thing. There are countless companies that dominated a given technology space that are no longer in business. As an investor, this is a phenomena not to be ignored. Have you ever heard of Baldwin Locomotive Works? Once the dominant company of rail transportation. Baldwin’s commitment to steam engine technology and refusal to provide R&D budget to diesel led to its demise.
IMHO, it doesn’t necessarily matter whether ARMH’s products have become “the standard” and that they’ll dominate the business … that won’t automatically translate into huge profits as a stock. Rather, eventually it may only guarantee a small premium over its competitors. By analogy, just look at INTC years ago versus today. If ARMH’s products are superior to competitors’ offerings, but still “similar enough”, it may not offer much incremental pricing power.
In contrast, if SWKS is offering a truly unique product in terms of its design integration with its customers, then it might be able to receive an even higher incremental pricing power.
I don’t know enough about the industry to say whether or not those “ifs” are true, but I think that I know enough to know that merely being considered an industry standard is not enough by itself to make for truly outstanding profits.
as always, i am full of carp
Shuik - Do you feel differently?
Talked to my friend a bit more.
ARMH is the Intel of Mobile and IoT period.
I disagree that ARMH cannot make 10x since it is already won.
Example GOOGL back in 2004 already won. It was IPOed back in 2004 for $80 and now it is selling for $700 after a split. You can do the math your self and see that it is more than 10x in 12 years.
About SWKS it has competition from QRVO and QCOM. That of course is not news, however he says that in the Analog world there is no standard company (and probably won’t be one) since the design and the chip processing are mixed.
What does it mean?
ARMH sells its design and it can be manufactured by any Chip maker. However, in the analog world you build your analog solution for the specific Chip manufacturer. It cannot be transferred to a different chip manufacturer as is.
That means the SWKS will have to constantly prove itself against others not only with its design but also with the cooperation with the Chip maker.
Indeed SWKS and ARMH don’t directly compete.
However from my perspective ARMH is a much safer bet than SWKS on Mobile and IoT. All we have to do is wait for it to come down a bit.
Shuki
I disagree that ARMH cannot make 10x since it is already won.
However from my perspective ARMH is a much safer bet than SWKS on Mobile and IoT. All we have to do is wait for it to come down a bit.
Shuki, if you think ARMH might go up 10 times from here, why would you wait for a better price? Not to mention that it’s already down 20% in the last 45 days and over 10% over the last year. How much more do you think it has to go down before its a buy?
Matt
MasterCard (MA) Ticker Guide
Long SWKS, Curious about ARMH
From ARM website:
The market in 2014
In 2014, approximately 65 billion silicon chips were manufactured (source: World Semiconductor Trade Statistics, January 2015). Of these, some 33 billion contained a processor. The processor is the brain of the chip, and controls not just the operation of the chip, but also the operation of the product that the chip goes into. ARM estimates that the total value of chips with processors sold in 2014 was about $80 billion, and that by 2020 the value of this market will have grown to about $120 billion.
ARM processor designs were in 12 billion chips, a 37% market share. About half of the ARM-based chips went into mobile devices. Moreover, in recent years we have also started to gain share in important growth markets such as enterprise infrastructure and embedded intelligence.
ARM may be a great company, I have no idea, but don’t think they don’t have lots of competition as well. According to their own website they only have 37% market share, while good I guess,doesn’t sound like they are the standard, especially if their main competition is Intel.
Brian
How much more do you think it has to go down before its a buy?
I don’t like to buy expensive companies no matter how good they are.
The 10x is not a guarantee just a very attractive possibility.
It certainly can double in five years if I buy it at $30 or even better $25.
I am sitting tight and waiting patiently.
Shuki
Shuki, if you think ARMH might go up 10 times from here, why would you wait for a better price? Not to mention that it’s already down 20% in the last 45 days and over 10% over the last year. How much more do you think it has to go down before its a buy?
ARMH is a very interesting play, very “asset light” and will continue to grow with all the ARM licensees out there. In terms of IoT, they will see heavy competition from Intel where Intel is more on equal footing versus mobile phones due to the software which is mostly custom/embedded. Intel’s IoT segment is currently about 5% of their business and growing at high single digits. Intel’s annual revenue on IoT is $2.3B about 50% greater than all of ARMH this year.
Sincerely,
Charlie
Shuki,
Thanks for bringing up other thoughts to test if SWKS is a good investment. I read a couple of sentences from your postings:
in the Analog world there is no standard company (and probably won’t be one)…
It cannot be transferred to a different chip manufacturer as is.
which you seem to interpret as higher risk and I interpret as key strengths. Your points are exactly why they have a moat from competition.
In the 28 years of my career in electronics I’ve seen the point in the circuit where RF signals transition from analog to digital get closer and closer to the antenna as digital devices got faster and faster. Now they have gotten so fast that they actually create hard to filter noise. SWKS seems to have a great combination of “black magic” experts (a common phrase in analog RF analog engineering because so few can get it right)and business management that has a strategy I love (be a solution to all communication device manufacturers so no matter who wins, SWKS wins too).
Yes, a 10X company can 10X again, but it is much, much harder and likely to take much longer.
I am and have been for a long time a big ARMH fan, but my expectations are more modest now than when I first bought it many years ago.
they will see heavy competition from Intel where Intel
This was discussed in length with my friend. In his opinion Intel has no chance competing against ARMH as ARMH is already the standard for both Mobile and IoT
F1Fun would you like to elaborate on that a bit more?
Do you mean the digital processing is making the “noise”, and that because are physically closer (inverse square etc) to the antenna as size of the device shrinks ?
What exactly do you mean by noise, static type signals?
Am I correct in thinking every radio bandwidth requires a matching physical antenna?
obviously I don’t know much about the engineering and physics of this.
However from my perspective ARMH is a much safer bet than SWKS on Mobile and IoT.
Shuki, You puzzle me. ARMH has a PE over 40 and SWKS has a PE of 11.5, and SWKS is growing faster than ARMH, and you keep saying ARMH is much safer from your perspective. I don’t get it.
In several posts you’ve seemed to try to find some fault with SWKS, often without a full understanding of what they do, what makes them special, and who their actual competitors are. I don’t see why you are taking this point of view. If you are short, you should close your short. They report earnings in less than two weeks, and it would be dangerous to hold a short through their earnings. JMO.
Best
Saul
.
Shuki, You puzzle me. ARMH has a PE over 40 and SWKS has a PE of 11.5, and SWKS is growing faster than ARMH, and you keep saying ARMH is much safer from your perspective. I don’t get it.
They have a much better moat and a clearer future. (And also an area I understand much better -Digital computing)
I will wait patiently for the price to go down before I invest.
In several posts you’ve seemed to try to find some fault with SWKS, often without a full understanding of what they do
I admit that I am not an expert in analog circuits and thus I shouldn’t rely on anyone (even your judgement, like I did) to invest in it. Are you an expert? (Still, it is not stopping you from deeply investing in it and strongly advocating it to others)
At least I have a friend that is an expert and should have heed his warning about SWKS not being a sure bet.
If you are short
I don’t do shorts, just longs. Though I wish you and other invested great success.
Best,
Shuki