Macquarie Research, Semis: Wintel no more in the mobilecomputing era

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Semis: Wintel no more in the mobilecomputing
era
Event
 During Microsoft’s BUILD conference this week, Qualcomm announced a
partnership with Microsoft to develop the first batch of Windows 8-based PCs
(mainly light form-factor notebooks and tablets), which will be powered by
QCOM’s MSM 8960 Snapdragon chipset. This move marks a milestone for
the ARM-camp players including NVDA and TI, in addition to QCOM, into the
NB market, which is dominated by Intel and presents the first evidence that
the PC industry is transitioning from x86-based devices to ARM-based
devices on the convergence of computing and communication and as formfactor
and battery life become increasingly imperative. We view this
development as positive for the Taiwan semi industry, particularly for TSMC
and ASE, as greater dollar value would be captured by foundries and OSATs
in future mobile-computing devices, vs. previous Wintel PC devices, whose
hardware value is mostly captured by Intel.
Impact
 Windows 8 PCs on QCOM’s Snapdragon chipset based on TSMC’s
28nm. Qualcomm is collaborating with Microsoft to develop chipsets from its
Snapdragon MSM8960 platform for notebooks and tablets that will use
Windows 8 OS. QCOM will launch its Snapdragon MSM 8960 chipset by this
year end, which we believe will be using TSMC’s 28-nm technology. The
MSM 8960 is designed for both smartphones and tablets and the chipset
family consists of single-core, dual-core or quad-core application processors
(ARM’s cortex A9) of up to 2-2.5Ghz, depending on applications and provides
dual-band Wi-fi, Bluetooth and FM through its Atheros combo chip.
 Intel fighting back with Android support from Google. Intel, meanwhile,
has showcased Android-based (Honeycomb) tablets and smartphones,
powered by its Atom processor Medfield (32nm SoC) at its IDF this week, in
an attempt to break into the smartphone and tablet market, where its lacks
presence. While we think Google’s Android support may help Intel attract
attention among app. developers, tablets and smartphones based on its Atom
chips are unlikely to gain market traction in 2012 due to thermal specs, where
it still has a disadvantage over ARM-based offerings. For instance, ARMbased
APs including QCOM’s Snapdragon, NVDA’s Tegra 2 and TI’s OMAP4,
have active power of 600-800mWatt, more power-efficient than Intel Atom’s 2-
5 watts. We believe Intel is unlikely to have any meaningful share in the tablet
and smarphtone market until 2013 when it launches its Haswell CPU and
Atom chip Silvermont, based on 22nm and tri-gate transistor technology.
According to Intel, its 22nm, tri-gate technology based CPU Ivy Bridge
provides up to 30% reduction in active power and 20-fold gain in standby time
vs its 32nm CPU Sandy Bridge.
 TSMC is one of the key building blocks of the mobile-computing era. The
significance of the foundry business model will expand in the era of mobilecomputing
as more devices will be powered by non-IDM technologies. We
see this era as a long-term structural positive for the overall Taiwan
semiconductor manufacturing industry. While the industry fundamentals are
unlikely to see a meaningful recovery near-term, we reiterate our Outperform
rating on TSMC as a reflection of our long-term favourable view of the
company’s dominant position in the foundry industry, through its lead in 28nm
and execution. We also like ASE for its increasing exposure to mobile and
believe the stock would become a strong beta play into this mobile-computing
theme once the semi cycle bottoms in 1Q12.