Motley Fool Money
Cashing In On Chips
Thu Jul 20 2023Description
The episode covers Taiwan Semiconductor's performance, challenges, importance, and partnerships. It also discusses the challenges and opportunities in chip manufacturing, as well as the impact of net metering rates on the battery market.
Insights
Taiwan Semiconductor expects compound annual revenue growth despite short-term challenges
Despite a 10% decrease in revenue and 23% decrease in net income, Taiwan Semiconductor remains confident in achieving 15-20% compound annual revenue growth over the next several years.
Import and export restrictions pose challenges for chip manufacturers
Import and export restrictions create problems for chip manufacturers, especially those relying on advanced EUV machines for making powerful chips.
Micro-inverters offer better performance and visibility in the solar inverter market
Micro-inverters attached to individual solar panels provide better performance and visibility compared to central and string inverters, impacting product demand in the market.
Changes in net metering rates affect the payback period for solar installations
Lower net metering rates can increase the payback period for solar installations, leading to potential higher attachment rates for batteries.
In-phase and SolarEdge expanding into backup batteries and EV chargers
Both In-phase and SolarEdge are expanding their businesses into backup batteries and EV chargers, anticipating the growing demand in the market.
California's lowered metering rates impact the battery market
California's lowered net metering rates have affected the battery market, resulting in doubled payback periods for solar installations with batteries.
Battery installation offers a strong economic incentive over time
Despite short-term challenges, there is a strong economic incentive for installing batteries in solar systems, as solar energy becomes the cheapest source of energy.
Taiwan Semiconductor's expertise in chip fabrication makes them important in the industry
Taiwan Semiconductor has grown in importance due to their expertise in chip fabrication since the 1980s, attracting partners like Nvidia for ambitious AI forecasts.
Maintaining good relationships with installers is crucial for inverter manufacturers
Inverter manufacturers need to maintain good relationships with installers, as their preferences significantly impact product demand in the solar inverter market.
The backlog of EUV machine orders is expected to grow
There is a big backlog of orders for extreme ultraviolet (EUV) machines, which are necessary for making advanced chips, and this backlog is expected to continue growing.
Chapters
- Taiwan Semiconductor's Performance and Challenges
- Taiwan Semiconductor's Importance and Partnerships
- Challenges and Opportunities in Chip Manufacturing
- Net Metering Rates and Battery Market Impact
Taiwan Semiconductor's Performance and Challenges
00:05 - 08:21
- Taiwan Semiconductor's revenue was down 10% and net income down 23%, but this was expected due to slow sales for phones and PCs.
- The company acknowledges macro headwinds and competition in North America, which has led to a delay in building fabrication facilities in Arizona.
- Despite short-term challenges, Taiwan Semiconductor remains confident in achieving 15-20% compound annual revenue growth over the next several years.
- The lack of skilled workers is a challenge for semiconductor growth in the US, including both factory construction and operation.
- Legislation has been introduced to address the need for infrastructure and skilled workforce development in chip manufacturing.
- Smaller nanometer chips allow for more transistors and compute power in a smaller format, resulting in greater efficiency and power savings.
- Power-efficient chips are crucial for smartphones like the iPhone to provide longer battery life while maintaining high performance.
Taiwan Semiconductor's Importance and Partnerships
07:53 - 15:32
- Small form factor chips are important for smartphones to be power efficient and have long battery life.
- Fabrication facilities for nanometer-sized chips are complex and require expensive equipment and expertise.
- Taiwan Semiconductor has grown in importance due to their expertise in chip fabrication since the 1980s.
- Nvidia relies on Taiwan Semiconductor for their ambitious AI forecasts.
- Taiwan Semiconductor avoids competing with their customers to maintain their position as a trusted chip manufacturer.
- TSM charges a premium for fast delivery of chips, benefiting both them and their customers.
- ASML, a lithography maker, reported a good quarter but did not provide guidance for 2024 due to lack of visibility.
- ASML has a robust backlog for extreme ultraviolet lithography machines, but import/export restrictions in China pose challenges.
Challenges and Opportunities in Chip Manufacturing
15:09 - 22:31
- Import and export restrictions are problematic for chip manufacturers.
- Older machines can still be sold to certain customers in China.
- EUV machines are used to make the most advanced chips.
- EUV machines are necessary for making tiny but powerful chips for smartphones and high-performance systems.
- There is a big backlog of EUV machine orders that is expected to grow.
- Solar inverters convert direct current (DC) from solar panels into alternating current (AC) used by electrical systems.
- Micro-inverters attached to individual solar panels offer better performance and visibility compared to central and string inverters.
- Installers play a key role in the solar inverter market, as their preferences impact product demand.
- Maintaining good relationships with installers is crucial for inverter manufacturers.
- Reforming net metering rates, such as in California, can have short-term impacts on the solar inverter market.
Net Metering Rates and Battery Market Impact
22:14 - 28:17
- Changes in net metering rates can impact the payback period for solar installations.
- Lower net metering rates may lead to increased battery attachment rates.
- In-phase and SolarEdge are both players in the micro-inverter space, but with some differences.
- In-phase relies more on the US market, while SolarEdge has a larger international presence.
- Both companies are expanding into backup batteries and EV chargers.
- Battery storage is still a small part of their businesses, but demand is expected to grow over time.
- California's lowered metering rates have affected the battery market, doubling payback periods for solar installations with batteries.
- Despite short-term challenges, there is a strong economic incentive for battery installation over time.
- Solar becoming the cheapest source of energy creates a long-term opportunity for in-phase and the solar industry.