US Semiconductor Financial Report Week: Intensive listing of the five core targets, strong fundamentals, difficult to solve the “cycle sustainability” torture

The Zhitong Finance App learned that the latest North American semiconductor industry research report released by Morgan Stanley indicates that the fundamentals of the semiconductor industry are currently strong, but the core controversy in the market has shifted from short-term performance figures to “how long the boom cycle can last.” The report focuses on looking at the five companies that will release earnings reports this week — AMKR.US (AMKR.US), NXP (NXPI.US), Allegro Microsystems (ALGM.US), Intel (INTC.US), and SNDK.US (SNDK.US). The following are the core concerns of each company's financial report:

EMAG Technology: Focus on gross margin sustainability and partnership with Nvidia

Morgan Stanley gave IMAC technology a “neutral” rating, with a target price of $70. The company will release financial results after the market on October 26. After second-quarter results surpassed expectations, the market is concerned about whether its gross margin can continue to improve. The company's gross margin guideline for the third quarter was 18.5% to 19.5%, higher than the previous forecast for the second half of the year. The computing business continues to benefit from AI demand and the volume of HDFO, but the communications business faces memory limitations and the shift of SiP to Vietnam. The report focuses on whether pricing can bring further upside and the sustainability of extending current profit margins into 2027. Furthermore, Nvidia and Imac Technology announced that they will increase South Korea's intermediate-layer wafer production capacity by more than 300% by the end of 2028, and have reached a new agreement of 1.3 billion US dollars (total commitment of 3 billion US dollars). Imark also expanded its investment in Arizona to $12 billion, but management reiterated that it is expected to face 1-2 percentage point operating margin resistance starting in 2027, and the Arizona plant is expected to increase profits only after the end of 2029.

NXP: Auto business hits bottom, focus on inventory and pricing negotiations

Morgan Stanley gave NXP an “added” rating, with a target price of $338. The company will release financial results after the market on October 27. The research report predicts that its third-quarter results and fourth-quarter guidance are generally in line with expectations, but the automotive business is expected to improve. According to Damo's third-quarter distributor survey, the proportion of respondents expecting the automobile business to be weaker than seasonal levels has dropped to 11% from 15% in the previous quarter, indicating signs of market stabilization. Inventory tracking shows that automotive OEMs and supplier inventories have fallen below the historical median, and Western tier 1 suppliers continue “hand order” procurement. As delivery times increase, customers are seeking to lock in future supplies (63% of respondents reported extended delivery times). The research report focuses on: 1) the normalization of automobile inventory and order models; 2) as supply tightens, whether NXP will get more chips in 2027 pricing negotiations (the survey showed that 55% of respondents reported strong analog chip pricing and 54% reported strong MCU pricing).

Allegro Microsystems: Data center business explodes, eyes 2027 pricing

Morgan Stanley gave Allegro Microsystems an “plus” rating, with a target price of $52. The company will release its earnings report before the market on October 29. The research report predicts that its third-quarter results will fall at the high end of the guide, with strong guidance for the fourth quarter. The recovery of its automobile business predates that of its peers, and is mainly driven by increased bicycle value rather than inventory replenishment. Orders for the June quarter increased 30% year over year. The research report focuses on: 1) automotive momentum and 2027 pricing negotiations (can improving the pricing environment support more favorable results in 2027 after ASP falls by one digit in 2026); 2) data center growth and current sensor penetration rate. The data center business increased 32% month-on-month in the June quarter, accounting for 17% of total revenue; current sensors surged 66% month-on-month. Management expects the data center business to more than double in FY2027 (Damo is expected to be +114% year over year), driven by hyperscale corporate capital expenditure and design orders.

Intel: Server “out of stock and price increases” support superficial prosperity, PCs and foundry conceal hidden structural concerns

Morgan Stanley gave Intel a “neutral” rating, with a target price of $84. The company will release financial results after the market on October 29. Damo believes that there are three core highlights in this financial report:

Highlight 1: The server business is ostensibly prosperous, but “exceeding expectations” is due to lack of stock and price increases

The research report predicts that its server data will be very impressive, but Damo is “skeptical” about this. Currently, there continues to be a shortage of server microprocessors, mainly due to the strong demand for AI agents using CPUs. Intel took the opportunity to increase supply and increase prices by double digits for some transactional customers, which is likely to push earnings beyond expectations. However, Damo pointed out that this strong data is highly dependent on “shortages,” and that buyers' expectations have far surpassed the general expectations of Damo and Wall Street.

Highlight 2: The PC market is deteriorating at an accelerated pace, which may drag down the 2027 forecast of $3-4 billion

PCs are still Intel's biggest source of revenue. However, the PC market situation is deteriorating dramatically: ODM PC assembly volume fell 17% month-on-month in the third quarter (5% increase in normal seasons) and 26% year-on-year; Damo expects PC shipments to drop 11% in 2027. If the division's revenue falls at the same time as PC shipments in 2027, it will have a downward impact on the market consensus of $3-4 billion.

Highlight 3: Although the OEM business is progressing smoothly, it is facing a structural contradiction of “no spare time for OEM”

Although the development of the 18A and 14A is progressing smoothly, Damo is questioning its foundry strategy: if Intel's CPUs are sold out by 2028, can they still free up enough surplus production capacity to meet the needs of large OEM customers? The research report further pointed out that Wall Street often sees foundry as a technical issue, but Damo's concerns are more structural — Intel lacks core foundry capabilities, and “can't even meet its own needs” is its worst advertisement for soliciting OEM customers.

SanDisk: The storage market is strong, but earnings alone are difficult to act as a catalyst

Morgan Stanley gave SanDisk an “extra” rating, with a target price of $1,750. The company will release financial results after the market on October 29. The research report believes that the storage market is very strong, but it does not expect this quarter's earnings report to be a catalyst. Three months ago, the market was extremely pessimistic about short-term pricing, but Damo was optimistic and saw strong double-digit price increases in the third and fourth quarters. According to the research report, data center demand (especially eSSD) is continuous, the reduction in DRAM specifications (reduction in main memory) has increased the demand for high-speed local storage as a cache, and the shortage of mechanical hard drives (HDD) has reduced the trend towards HDD migration. Although the industry expects ASP to rise 15%-20% in the fourth quarter, SanDisk's increase may be slightly lower. The research report points out that the company tends to give conservative guidance during a strong period. It is expected that the third quarter will clearly exceed expectations, but the fourth quarter guidance is relatively in line with expectations.