2022 Semiconductor Outlook - Zacks
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January 20, 2022
2022 Semiconductor
Outlook
Semiconductors
John Vinh, CFA / 503.821.3882 / jvinh@key.com
Jim Long, CFA / 503.821.3975 / jim.long@key.com
KeyBanc Capital Markets, For important disclosures and certifications,
Member FINRA/SIPC please refer to the Disclosure Appendix.
2022 Outlook: Portfolio Manager Summary 2
We expect 2022 to be another strong expansionary year in the semiconductor industry and forecast +12% revenue growth driven
by broad-based end demand and healthy pricing, while key cyclical indicators, such as inventories, remain largely healthy. As
there is likely to be peaking cyclical concerns, following three consecutive years of significant appreciation in the SOXX (+242%
from 2019-2021), while a fourth year would be unprecedented, we recommend investors lean into more secularly focused names,
but remain constructive on the broader cyclical stocks. We see semiconductor growth this year being punctuated by cloud data
center, accelerating EV adoption in auto, industrial expansion, and continued rollouts of 5G globally. Our key ideas given these
industry trends are AMD, MRVL, ON, QCOM, and SYNA.
Key Stock Ideas:
• AMD (OW, $155 PT) – One of the most levered to cloud, while share gains (FB, MSFT) and increased capacity should drive outsized growth.
• MRVL (OW, $95 PT) – Most secularly exposed within our sector (cloud, auto, and 5G), while improving enterprise should also provide tailwinds.
• ON (OW, $72 PT) – While cyclically exposed, management turnaround, increased exposure to EV, and margin expansion should drive outperformance.
• QCOM (OW, $220 PT) – 5G, share gains vs. Mediatek, and increasing non-handset exposure core to thesis, while Apple 2023 concerns derisked.
• SYNA (OW, $310 PT) – IoT exposure and increased capacity should drive outperformance, while M&A represents optionality.
Thematic Ideas:
• We expect cloud to remain a key growth driver for data center, while strengthening enterprise should be additive. We expect cloud data center
growth of +18% this year, as hyperscalers continue to increase capacity and invest in expansionary workloads such as ML/AI and the metaverse.
Enterprise demand continues to strengthen and should grow +5% this year (+AMD, +AVGO, +LSCC, +MPWR, +MRVL, +MU, +NVDA).
• We expect the rollout of 5G to continue and to drive growth both in handsets as well as in infrastructure. We expect the continued rollout of 5G
globally with most of the infrastructure capex growth being concentrated in North America and China. Accordingly, smartphone units should grow +7%
in 2022 with 5G penetration reaching just over 50%, as compared to 40% in 2021. Our favorite 5G beneficiaries include +ADI, +MRVL, +MU, +QCOM,
and +SWKS.
• The return to automotive LV production growth and shift to EVs should sustain semiconductor growth. With automotive light vehicle (LV)
production expected to return to growth this year, as we estimate +9% growth, and the continued electrification of vehicles, as we see EV penetration
reaching 25% this year, we expect sustained growth for automotive semiconductors and beneficiaries to include +ADI, +AMBA, +INDI, +MPWR,
+MRVL, +MU, +NXPI, and +ON.
• The metaverse is early days, but not too early to invest in the hype cycle. While the metaverse is clearly still very early days, thematically it’s not
too early to invest. We see a number of beneficiaries including +AMD, +MU, +NVDA, +QCOM, and +SYNA.
• Expect M&A to continue. As we enter the latter stages of the current semiconductor upcycle, we anticipate consolidation will continue, as companies
look to ensure sustained growth beyond the current cycle. In our view, the companies most likely to be acquisitive this year are AVGO, INTC, NVDA,
NXPI, QCOM, SWKS, and TXN, while the companies most likely to be acquired are AMBA, LSCC, MRVL, SLAB, and SYNA.
January 20, 2022
Semiconductor Key Ideas 3
Key Ideas Most Secular 5G Metaverse
SYNA QRVO ADI
QCOM
ON QCOM AMD
MRVL SWKS QCOM
NVDA TXN
MRVL SYNA
SYNA
QCOM
AMD MRVL XLNX NVDA
MU MU
AMD AVGO
SLAB
M&A: Sharks and Minnows Cloud
LSCC
SWKS
AVGO
SYNA NVDA MU
AVGO NXPI AMBA
MRVL AMD INTC
NVDA MPWR
MRVL
QCOM
SLAB
TXN Auto
INTC LSCC AMBA
ADI ON MCHP MPWR NXPI
INDI
Key: Overweight Sector Weight
Source: KeyBanc Capital Markets Inc. estimates
Circle size correlates with market cap January 20, 20224
Higher Aggregate Inventories Are Overstated
Total Aggregate Supply Chain inventories increased by two days q/q to 68 days, above the five-year 3Q average of
63 days. This is the first quarter in the current upcycle in which aggregate inventories are above historical levels.
• While aggregate inventory of 68 days is above the five-year average, we believe that due to kitting issues and supply
constraints, inventories at current levels are actually overstated and are still effectively below targeted levels. Our
balance sheet analysis of semiconductor companies under coverage reveals the 3Q21 +10% y/y increase in inventories
was mostly due to raw materials/WIP, which increased +14% y/y, while finished goods inventory was -1% y/y.
January 20, 2022
Sources: Company reports5
2022 Should Be Another Strong Year of Growth
• Semiconductor IC ex-memory shipments grew 17% y/y in November, compared with +15% and +17% y/y
in October and September, respectively, reflecting a modest improvement in supply with demand
remaining robust. We expect semiconductor IC shipments ex-memory to sustain double-digit y/y growth
through 4Q, given sustained demand drivers in auto, computing, and industrials.
• Appreciating 43% in 2021, the SOXX outperformed the S&P 500 by 16%. While a consolation is underway
with some pullbacks on high-multiple names, we believe the semi-upcycle, supported by secular trends in
5G, data center, and EV, will sustain in 2022, which should fuel the SOXX to make new highs.
January 20, 2022
Sources: SIA, Thomson Reuters6
Introducing 2022 Semiconductor Revenue Forecast of +12%
IC Units Projection: 11% in 2022
Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21E Mar-22 Jun-22 Sep-22 Dec-22E
IC Units (M) 70,869 70,385 81,334 87,257 89,223 95,602 98,391 100,359 101,362 104,403 110,668 109,561
Q/Q Growth -7% -1% 16% 7% 2% 7% 3% 2% 1% 3% 6% -1%
Y/Y Growth 4% 1% 6% 14% 26% 36% 21% 15% 14% 9% 12% 9%
Total Units (Year) (M) 309,846 383,575 425,994
Growth 6% 24% 11%
IC ASP ($) $1.21 $1.22 $1.14 $1.08 $1.13 $1.16 $1.23 $1.24 $1.18 $1.16 $1.19 $1.26
Q/Q Growth 5% 1% -7% -5% 5% 3% 6% 1% -5% -1% 2% 6%
Y/Y Growth 3% 7% 1% -6% -6% -5% 8% 15% 4% 0% -3% 2%
Average ASP (Year) $1.16 $1.19 $1.20
Growth 1% 2% 1%
IC Revenue ($M) $85,677 $85,868 $92,719 $94,211 $100,939 $111,249 $121,034 $124,144 $119,283 $121,451 $131,661 $138,298
Q/Q Growth -2% 0% 8% 2% 7% 10% 9% 3% -4% 2% 8% 5%
Y/Y Growth 7% 8% 7% 7% 18% 30% 31% 32% 18% 9% 9% 11%
Total IC Revenue (Year) ($B) $358.5 $457.4 $510.7
Growth 8% 28% 12%
Semi Industry Revenue ($M)* $104,556 $103,606 $113,587 $115,813 $123,142 $133,675 $144,660 $149,107 $144,931 $147,332 $159,873 $166,597
IC % 82% 83% 82% 81% 82% 83% 84% 83% 82% 82% 82% 83%
Q/Q Growth -4% -1% 10% 2% 6% 9% 8% 3% -3% 2% 9% 4%
Y/Y Growth 7% 5% 6% 7% 18% 29% 27% 29% 18% 10% 11% 12%
Total Semi Revenue (Year) ($B)* $437.6 $550.6 $618.7
Growth 6% 26% 12%
For 4Q21 IC unit shipments, we continue to expect sequential unit growth of +2%, supported by
continued strength in demand and limited supply.
For 2022, we introduce our IC semiconductor revenue forecast of +12% driven by 5G smartphones,
data center, industrial, and automotive, with IC unit shipment to +11%. We expect IC ASP to increase
modestly and increase +1% as supply constraints are expected to persist, while we see memory
pricing stabilizing in 1H22. This compares to five-year average annual growth rates for IC unit, ASP,
and revenue of +6%, 0%, and +6%, respectively.
*Total semiconductor revenue also includes discretes, optoelectronics, sensors, and actuators. Revenue for these
components has been fairly stable.
January 20, 2022
Sources: SIA, KeyBanc Capital Markets Inc. estimatesSmartphone Forecast 7
Global Smartphone Shipments
5G Chipset (M) 2021E Growth 2022E Growth
AAPL/QCOM 174 117% 245 41%
Huawei/HiSilicon 10 -75% 0 -100%
MediaTek 160 191% 200 25%
Samsung 65 132% 140 115%
QCOM/Other 142 424% 165 17%
Total 550 139% 750 36%
5G Penetration 40% 23% 51% 11%
We expect 2022 smartphone shipments to grow 7% to 1.46B, as compared to a 5% increase
in 2021. The higher growth is driven by continued 5G migration and increasing launch of 5G
handsets, which we estimate will reach almost 750M (+36% y/y) in 2022. We believe U.S. mobile
chip suppliers, including AVGO, QCOM, QRVO, and SWKS, will continue to benefit from content
growth from the adoption of 5G.
Sources: IDC, KeyBanc Capital Markets Inc. estimates
January 20, 2022iPhone 14 Expectations 8
Wi-Fi 6E: We believe all SKUs will
adopt Wi-Fi 6E, and AVGO and SWKS
Model size: We project AAPL will will benefit from content increases from
eventually sunset the mini and replace the radio and RF FE, respectively.
it with a 6.1” model. Overall, we expect
6.1” and 6.7” models for low-end SKUs mmW: While the global infrastructure
and 6.1” and 6.7” models for Pros. rollout of mmW has not been a priority,
we expect mmW versions to be
released for more regions, such as
EU/Japan/Korea, with attach rate
Modem: With a supply agreement with
increasing from 55% to 67%.
QCOM until 2023 and internal modem
initiative still underway, we believe
Notch: We expect high-
AAPL will still use QCOM’s modem in
end models to adopt
the iPhone 14.
smaller punch-hole(s) to
replace the notch, which
will enable more display
area while keeping
space for the front
camera. For low-end
Memory: We expect AAPL to increase
models, we expect the
memory loading in the iPhone 14 with
notch size to reduce.
6GB DRAM expected for both the low-
end and high-end models, compared
Application processor: Apple is Camera: We expect the front-facing
with 6GB and 4GB for the Pro/Max and
expected to introduce a new A16 camera of all iPhone SKUs to support
13/Mini, respectively.
processor, based on TSMC 4nm, for auto-focus using CRUS’s camera
the high-end models, while keeping controller.
A15 for low-end models.
Sources: IDC, KeyBanc Capital Markets Inc. estimates
January 20, 2022Global Carrier Capex Forecast 9
We estimate 2022 global carrier capex growth to moderate to 1.1%, as compared to 5.8% in 2021.
The 2022 growth is expected to be led by the U.S. carriers with a growth of 6.2%, particularly AT&T and
Verizon for C-band deployment. Despite components shortages and rising input costs, China carriers are
expected to increase the 5G capex budget by 5.0%, expecting a continued y/y increase in 5G BTS
deployment. Korea and Japan will likely be stable in 2022. EU carriers are expected to lower capex by
6.9% after 11% growth in 2021.
Sources: Thomson Reuters, KeyBanc Capital Markets Inc. estimates
January 20, 20225G Base Station Forecast 10
With the new MIIT’s five-year plan to triple 5G BTS to 3.64M by 2025, we continue to expect
China to deploy 6.1M BTS over the 5G cycle, as compared to 4M deployments on LTE. We
continue to expect China deployment to represent more than half of the volume deployed WW in this
cycle. In 2022, we anticipate China to deploy 670K base stations and WW deployment to pick up
meaningfully, led by North America.
Source: KeyBanc Capital Markets Inc. estimates
January 20, 202211
Auto Recovery and Secular Shifts Should Benefit Semiconductors
Automotive semiconductor suppliers in our coverage sector have outpaced global LV production by ~15%
over the past four years. We expect the outperformance to continue in 2022, supported by: 1) secular trends in
EV, electrification, and autonomous driving; 2) OEMs’ prioritization of premium models; and 3) accelerating EV
penetration WW. The improving supply chain is also anticipated to enable LV production to resume annual growth.
• Secular trends drive sustainable content gains. The secular shift
toward EV/electrification and autonomous driving is accelerating,
faster than OEMs’ expectations. We believe content gains are likely
to allow auto semis to continue outpacing LV production growth in
2022. With auto LV production estimated to grow 9% in 2022, we
currently estimate auto semi growth of 12%.
• Shortages and COVID-19 disruptions shift focus to premium
models and EV. In this constrained environment, OEMs are
prioritizing premium models and EVs, which create tailwinds for richer
content. We expect content per vehicle (CPE) to increase from ~$480
to ~$630, with a 6% CAGR from 2021-2026. Today, CPV for internal-
combustion auto is $400-$500, as compared to $900-$1K for a
battery-powered electric vehicle.
• We expect EV penetration to reach 25% in 2022. In 2021, EV
accounted for ~20% of the global LV production, compared to 13% in
2020. With increased government mandates, consumer interest, and
OEMs’ prioritization, we expected EV penetration to reach 25% of the
global LV production in 2022, and approach 53% by 2026, with a five-
year CAGR of 28%.
• Our favorite auto-exposed names are ADI (30%), AMBA (23%),
INDI (100%), MCHP (15%), MPWR (17%), NXPI (50%), and ON
(34%).
Sources: Company reports, IHS, KeyBanc Capital Markets Inc.
Note: Results presented cannot and should not be used as an indicator of future performance. January 20, 202212
NB/PC Forecast
Looking into 2022, we expect NB/PC unit shipments to be flat at ~350M vs. +24% in 2021, driven by higher commercial
shipments, offset by lower Chromebook demand, while mainstream consumer is expected to be stable. With a higher mix of
commercial, we project the ASPs to increase, benefiting from higher semiconductor content in those models, which should
enable continued growth for commercial NB/PC-exposed companies, such as INTC, MPWR, MU, and SYNA.
We expect 2022 PC market share to remain stable. We expect PC market share between AMD and INTC to remain
relatively stable in 2022 with INTC share expected to be 79-80% and AMD share expected to be 20-21%. With Alder Lake, we
expect INTC to regain market share in desktop PCs with shares expected to increase from 77-78% in 2021 to 85% in 2022.
We expect this to be offset by continued share gains by AMD in Consumer PC NBs, with shares expected to increase from
23% in 2021 to 28-30% in 2022.
Sources: KeyBanc Capital Markets Inc.
January 20, 2022Data Center Outlook 13
Total CSP capex is expected to be $234B (+12% y/y) for 2021, and to reach $262B (+12% y/y) in 2022, with data
center remaining a focus for investment. Meta, Microsoft, Google, and Alibaba are expected to lead 2022 capex
growth, with Amazon likely maintaining the current level of spending. For data center, we expect the Cloud
(estimated +18%) to lead the growth, while Enterprise will benefit from the continued recovery of enterprise
spending for IT upgrades and maintenance, with +5% growth expected. Trends for the metaverse also create
tailwinds for data center, while the magnitude of opportunities remains early to estimate.
Sources: Company reports, KeyBanc Capital Markets Inc. estimates, Thomson Reuters January 20, 2022Metaverse 14
The metaverse and the virtual developer ecosystem is emerging. The metaverse is a persistent and immersive digital
environment of independent, yet interconnected, networks that will use yet-to-be-determined protocols for communications.
While the benefits and opportunities from the metaverse are not immediately viable, emergent metaverse solutions indicate
potential use cases such as gaming, virtual workspace, design, and manufacture. We expect the market to reach $730B by
2028, representing a 44% CAGR from 2020-2028. Beneficiaries of the metaverse include AMD, MU, NVDA, QCOM, and SYNA.
Accelerating capex on metaverse-related R&D
and system infrastructure. Meta announced on its
recent 3Q results conference call that the Company
will spend $10B on the metaverse in 2021, and
these costs are expected to rise each year for the
next several years. 2022 capex is also expected to
reach $29B-$34B, up over 60% from $19B in 2021.
Most of the spending will be allocated to AI,
servers, and data centers; Nvidia’s development of
Omniverse and Nvidia AI is also collaborating with
auto manufacturers such as BMW to optimize the
digitalization of auto production.
Worldwide spending on AR/VR equipment
shows strong demand in the market. AR/VR
spending is accelerating out of the pandemic and is
forecasted to grow from $12B in 2020 to $73B in
2024, according to IDC. This represents a five-year
CAGR of 54%.
Sources: IDC, KeyBanc Capital Markets Inc. estimates
January 20, 2022M&A Outlook 15
As we enter the latter stages of the current semiconductor upcycle, we anticipate consolidation
will continue, as companies look to ensure sustained growth beyond the current cycle. We expect
the continued drivers of consolidation to be scale and/or accelerate secular growth opportunities
including cloud/data center, IoT/edge computing, and automotive.
Sharks Minnows
Company Weighted Score Company Weighted Score
NVDA 4.7 SLAB 5.0
AMD 4.3 AMBA 4.8
QCOM 4.1 PI 4.7
INTC 4.0 MRAM 4.4
AVGO 4.0 GSIT 4.4
MU 3.7 SMTC 4.3
NXPI 3.7 INDI 4.3
TXN 3.6 LSCC 4.2
STM 3.6 CRUS 4.0
SWKS 3.5 MRVL 3.9
IFX 3.5 PXLW 3.9
MPWR 3.5 SYNA 3.9
Based on our quantitative and qualitative analysis, we believe the companies most likely to be
acquisitive this year are AVGO, INTC, NVDA, NXPI, QCOM, SWKS, and TXN. Conversely, we believe
the companies most likely to be acquired are AMBA, LSCC, MRVL, SLAB, and SYNA.
Sources: Thomson Reuters, KeyBanc Capital Markets Inc. estimates
January 20, 202216
Secular Growth Is Driving a Rerating in Semiconductors
Multiple secular drivers, including 5G, cloud data center, industrial IoT, and EV/ADAS, are driving rapid
growth in semiconductor demand, with supply constraints and increased industry focus mitigating cyclicality.
As such, we believe valuation multiples for the SOX have been structurally rerated to higher levels, and the
upward trend of multiple expansions is expected to sustain in 2022. Over the last three years (2019-2021),
we’ve seen the SOX rerate to an average forward P/E multiple of 20.6x, as compared to 15.3x from 2017-
2019.
January 20, 2022
Sources: Thomson ReutersValuation (P/E Multiple) 17
Data range: January 20, 2019-January 20, 2022.
Sources: Thomson Reuters, KeyBanc Capital Markets Inc. estimates
January 20, 2022Valuation (EV/S Multiple) 18
Data range: January 20, 2019-January 20, 2022.
Sources: Thomson Reuters, KeyBanc Capital Markets Inc. estimates
January 20, 2022Comparison Table 19
Valuation
Mkt Stock 22E 23E 22E 23E
1/20/2022 Cap Performance EPS EPS Rev Rev CY22 CY23 CY22 CY23
Ticker Price ($MM) 2021 YTD Grth Grth Grth Grth P/E P/E EV/Rev EV/Rev
NVDA $241.50 $603,750 125.3% -17.9% 23% 20% 21% 16% 47.1x 39.2x 19.7x 17.0x
AVGO $547.72 $226,139 52.0% -17.7% 17% 9% 11% 5% 16.3x 15.0x 8.4x 8.0x
INTC $52.04 $211,126 3.4% 1.0% -30% 2% 0% 5% 14.1x 13.7x 3.0x 2.9x
QCOM $166.50 $186,480 20.0% -9.0% 23% 8% 17% 7% 15.2x 14.1x 4.9x 4.5x
TXN $173.45 $160,186 14.8% -8.0% 4% 6% 5% 6% 21.0x 19.8x 8.7x 8.2x
AMD $121.89 $147,196 56.9% -15.3% 27% 22% 19% 14% 36.3x 29.8x 7.9x 6.9x
MU $85.07 $95,259 23.9% -8.7% 42% 22% 18% 15% 8.6x 7.0x 2.9x 2.5x
ADI $158.63 $85,091 19.0% -9.8% 17% 12% 38% 6% 20.6x 18.3x 8.5x 8.0x
MRVL $73.80 $62,272 84.0% -15.6% 42% 29% 33% 19% 34.6x 26.7x 12.0x 10.1x
NXPI $199.61 $53,083 43.2% -12.4% 13% 8% 12% 7% 16.7x 15.5x 5.2x 4.8x
XLNX $185.61 $46,009 49.6% -12.5% 16% 14% 11% 7% 47.0x 41.2x 11.4x 10.7x
MCHP $73.97 $41,044 26.1% -15.0% 16% 6% 12% 5% 15.4x 14.5x 7.0x 6.7x
ON $55.54 $23,929 107.5% -18.2% 17% 6% 7% 4% 17.0x 16.0x 3.8x 3.7x
SWKS $142.99 $23,649 1.5% -7.8% 11% 10% 11% 7% 12.0x 10.9x 4.4x 4.1x
MPWR $404.16 $18,629 34.7% -18.1% 19% 24% 21% 18% 47.2x 38.2x 12.8x 10.9x
QRVO $137.15 $15,117 -5.9% -12.3% 14% 11% 11% 8% 10.7x 9.6x 3.3x 3.0x
SYNA $207.11 $8,134 200.3% -28.5% 21% 10% 14% 13% 17.5x 16.0x 5.2x 4.6x
LSCC $56.08 $7,680 68.2% -27.2% 18% 40% 12% 18% 46.5x 33.2x 14.1x 11.9x
SLAB $162.94 $6,548 62.1% -21.1% 19% 47% 9% 17% 69.4x 47.3x 5.0x 4.3x
AMBA $138.42 $5,075 121.0% -31.8% 29% 33% 22% 24% 73.3x 55.0x 11.9x 9.6x
CRUS $87.17 $4,981 11.9% -5.3% 10% 9% 10% 5% 15.3x 14.0x 2.7x 2.6x
INDI $7.96 $1,035 -9.3% -33.6% - - 129% 112% - - 6.7x 3.2x
Average 50.5% -15.7% 17.4% 16.7% 20.0% 15.4% 28.7x 23.6x 7.7x 6.7x
Median 39.0% -15.2% 16.7% 11.3% 12.0% 7.9% 17.5x 16.0x 6.9x 5.8x
SOX 41.2% -11.4%
S&P 500 27.2% -6.0%
Nasdaq 28.0% -9.5%
Sources: Thomson Reuters, KeyBanc Capital Markets Inc. estimates
Note: Results presented cannot and should not be used as an indicator of future performance.
January 20, 2022Advanced Micro Devices (AMD): Overweight; PT $155 20
Stock Ticker Price Mkt-Cap (Bil.) Price Target % Upside
Advanced Micro
AMD $121.89 $147 $155 27.2%
Devices
OUR CALL – Catalysts:
AMD is positioned well to significantly outpace cloud industry growth in 2022 of high teens, as we expect continued
market share gains, driven by deployments from CSPs, including MSFT and FB. Additionally, data center demand for
both hyperscale and enterprise is expected to remain strong in 2022.
While AMD was heavily constrained in 2021, we believe the Company has been able to secure enough supply,
particularly on wafer and ABF, to support continued outsized growth in 2022.
With the XLNX acquisition expected to close in 1Q, AMD remains one of the best companies to capture opportunities
in heterogeneous compute with both competitive FPGA and GPU offerings.
2021 Stock Performance Valuation Key Financials – Table
F2020 F2021E F2022E
Total Revenue ($millions) $9,763 $16,241 $20,462
% y/y 45% 66% 26%
Gross Margin 45% 48% 49%
Operating Profit $1,657 $3,899 $5,324
Operating Margin 17% 24% 26%
Tax Rate 3% 15% 15%
Net Income $1,575 $3,292 $4,502
EPS $1.28 $2.68 $3.67
% Y/Y Chg 105% 109% 37%
Share Outstanding 1228 1229 1228
Sources: Thomson Reuters, company reports, KeyBanc Capital Markets Inc. estimates Note: The results presented cannot and should not be viewed as an indicator of future performance.
January 20, 2022Marvell Technology (MRVL): Overweight; PT $95 21
Stock Ticker Price Mkt-Cap (Bil.) Price Target % Upside
Marvell Technology MRVL $73.80 $62.2 $95 28.7%
OUR CALL – Catalysts:
MRVL is positioned well to deliver LT revenue growth of 15-20%, with diversified secular growth vectors from Cloud,
5G, and automotive, and incremental supplies continuing to come online.
Prior acquisitions of AQ, Innovium, CAVM, Avera, and IPHI provide MRVL a complementary product portfolio and
strengthen MRVL’s capability to meet the increased demand for optimized silicon solutions in data center.
MRVL remains one of the best companies poised to capture opportunities at tier-ones and regional OEMs in 5G
infrastructure deployment, with upsides driven by potential share gains and continued networks upgrade WW.
We expect MRVL to benefit from the growing demand for compute and connectivity within vehicles, which should
drive content growth, and to continue to gain share in automotive ethernet.
2021 Stock Performance Valuation Key Financials – Table
F2021 F2022E F2023E
Total Revenue ($millions) $2,969 $4,446 $5,880
% y/y 10% 50% 32%
Gross Margin 63% 65% 65%
Operating Profit $718 $1,453 $2,147
Operating Margin 24% 32% 37%
Tax Rate 5% 5% 6%
Net Income $628 $1,271 $1,916
EPS $0.93 $1.56 $2.21
% Y/Y Chg 39% 68% 42%
Share Outstanding 675 813 866
Sources: Thomson Reuters, company reports, KeyBanc Capital Markets Inc. estimates Note: The results presented cannot and should not be viewed as an indicator of future performance.
January 20, 2022onsemi (ON): Overweight; PT $72 22
Stock Ticker Price Mkt-Cap (Bil.) Price Target % Upside
onsemi ON $55.54 $23.9 $72 29.6%
OUR CALL – Catalysts:
We have higher confidence in the sustainability of GM expansion with its increased focus on optimizing
manufacturing footprint and effort to divest low-margin, non-core business (10-15%) as supply normalizes in 2H22.
We believe ON’s new strategic focus on intelligent power and sensing in the auto and industrial end markets should
drive 15% and 13% CAGRs, respectively, 2x market growth, from CY21-CY25.
2022 is fully booked, supported by its LTSA and non-cancelable backlog with pricing largely fixed. We remain
optimistic that the new CEO Hassane El-khoury, who has a track record of successful company turnaround, should
be able to lead ON’s transformation to drive sustainable growth and margin expansion.
2021 Stock Performance Valuation Key Financials – Table
F2020 F2021E F2022E
Total Revenue ($millions) $5,255 $6,692 $7,312
% y/y -5% 27% 9%
Gross Margin 33% 40% 44%
Operating Profit $537 $1,420 $1,887
Operating Margin 10% 21% 26%
Tax Rate 13% 7% 18%
Net Income $352 $1,228 $1,478
EPS $0.85 $2.82 $3.40
% Y/Y Chg -43% 232% 21%
Share Outstanding 414 435 435
Sources: Thomson Reuters, company reports, KeyBanc Capital Markets Inc. estimates Note: The results presented cannot and should not be viewed as an indicator of future performance.
January 20, 2022Qualcomm Incorporated (QCOM): Overweight; PT $220 23
Stock Ticker Price Mkt-Cap (Bil.) Price Target % Upside
Qualcomm
QCOM $166.50 $186 $220 32.1%
Incorporated
OUR CALL – Catalysts:
QCOM is expected to benefit from 5G handset shipments growth to 750M in 2022 vs. 550M in 2021, and increased
adoption of its modem, mmW, and RF components across VOX+H, Samsung, and Apple, as new spectrums and
features (e.g., Wi-Fi 6E) are added in 5G handsets.
QCOM has been able to meaningfully add supply capacity to grow and gain market share vs. MediaTek in 2022.
The combined revenue from RFFE, auto, and IoT has exceeded $10B in FY21, up 69% y/y, representing 38% of
QCT revenue. While handsets will still lead NT growth, non-handset businesses are expected to sustain LT growth
and potentially moderate handset cyclicality.
Concerns for Apple’s modem are largely derisked, with QCOM expecting its share dropping to 20% in the 2023
iPhone, while any delay in Apple model development indicates potential upsides.
2021 Stock Performance Valuation Key Financials – Table
F2021 F2022E F2023E
Total Revenue ($millions) $33,467 $40,448 $43,693
% y/y 55% 21% 8%
Gross Margin 58% 58% 57%
Operating Profit $11,770 $14,898 $16,065
Operating Margin 35% 37% 37%
Tax Rate 13% 14% 14%
Net Income $9,811 $12,406 $13,410
EPS $8.54 $10.79 $11.66
% Y/Y Chg 104% 26% 8%
Share Outstanding 1149 1150 1150
Sources: Thomson Reuters, company reports, KeyBanc Capital Markets Inc. estimates Note: The results presented cannot and should not be viewed as an indicator of future performance.
January 20, 2022Synaptics, Incorporated (SYNA): Overweight; PT $310 24
Stock Ticker Price Mkt-Cap (Bil.) Price Target % Upside
Synaptics,
SYNA $207.11 $8.1 $310 49.7%
Incorporated
OUR CALL – Catalysts:
SYNA’s IoT, accounting for 55%+ of total revenue, is expected to grow at an estimated 10-15% LT revenue CAGR,
supported by wireless connectivity solutions and the automotive business, which should drive margin expansions.
SYNA has been able to secure meaningful wafer capacity starting in 4Q21 for its wireless IoT business, likely
benefiting from AVGO’s wireless IoT franchise, which should support continued robust growth for its IoT.
SYNA’s high IoT exposure, with the best-in-class wireless franchise from AVGO, makes it a compelling target for
consolidation.
2021 Stock Performance Valuation Key Financials – Table
FY2021 FY2022E FY2023E
Total Revenue ($millions) $1,340 $1,639 $1,855
% y/y 0% 22% 13%
Gross Margin 54% 58% 58%
Operating Profit $366 $570 $648
Operating Margin 27% 35% 35%
Tax Rate 12% 12% 12%
Net Income $316 $478 $538
EPS $8.35 $11.62 $12.69
% Y/Y Chg 39% 39% 9%
Share Outstanding 35 38 39
Sources: Thomson Reuters, company reports, KeyBanc Capital Markets Inc. estimates Note: The results presented cannot and should not be viewed as an indicator of future performance.
January 20, 2022Disclosure Appendix
Important Disclosures
Important disclosures for the companies mentioned in this report can be found at https://key2.bluematrix.com/sellside/
Disclosures.action.
Please refer to the analysts' recently published reports for company-specific valuation and risks.
Reg A/C Certification
The research analyst(s) responsible for the preparation of this research report certifies that:(1) all the views expressed
in this research report accurately reflect the research analyst's personal views about any and all of the subject
securities or issuers; and (2) no part of the research analyst's compensation was, is, or will be directly or indirectly
related to the specific recommendations or views expressed by the research analyst(s) in this research report.
Rating Disclosures
Distribution of Ratings/IB Services Firmwide and by Sector
KeyBanc Capital Markets Technology
IB Serv/Past 12 Mos. IB Serv/Past 12 Mos.
Rating Count Percent Count Percent Rating Count Percent Count Percent
Overweight [OW] 353 54.31 121 34.28 Overweight [OW] 134 68.02 46 34.33
Sector Weight [SW] 281 43.23 62 22.06 Sector Weight [SW] 61 30.96 9 14.75
Underweight [UW] 16 2.46 4 25.00 Underweight [UW] 2 1.02 1 50.00
Rating System
Overweight - We expect the stock to outperform the analyst's coverage sector over the coming 6-12 months.
Sector Weight - We expect the stock to perform in line with the analyst's coverage sector over the coming 6-12
months.
Underweight - We expect the stock to underperform the analyst's coverage sector over the coming 6-12 months.
January 20, 2022 Pg.25
John Vinh, CFA (503) 821-3882 / jvinh@key.comDisclosure Appendix (cont'd) Important disclosures for the companies mentioned in this report can be found at https://key2.bluematrix.com/sellside/ Disclosures.action. Please refer to the analysts' recently published reports for company-specific valuation and risks. Other Disclosures KeyBanc Capital Markets is a trade name under which corporate and investment banking products and services of KeyCorp and its subsidiaries, KeyBanc Capital Markets Inc., Member FINRA/SIPC (“KBCMI”), and KeyBank National Association (“KeyBank N.A.”), are marketed. KeyBanc Capital Markets Inc. (“KBCMI”) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. This report has been prepared by KBCMI. The material contained herein is based on data from sources considered to be reliable; however, KBCMI does not guarantee or warrant the accuracy or completeness of the information. It is published for informational purposes only and should not be used as the primary basis of investment decisions. Neither the information nor any opinion expressed constitutes an offer, or the solicitation of an offer, to buy or sell any security. The opinions and estimates expressed reflect the current judgment of KBCMI and are subject to change without notice. This report may contain forward-looking statements, which involve risk and uncertainty. Actual results may differ significantly from the forward-looking statements. This report is not intended to provide personal investment advice and it does not take into account the specific investment objectives, financial situation and the specific needs of any person or entity. No portion of an analyst’s compensation is based on a specific banking transaction; however, part of his/her compensation may be based upon overall firm revenue and profitability, of which investment banking is a component. Individuals associated with KBCMI (other than the research analyst(s) listed on page 1 of this research report) may have a position (long or short) in the securities covered in this research report and may make purchases and/or sales of those securities in the open market or otherwise without notice. As required by FINRA Rule 2241(C)(4)(A), financial interest, if any, by any research analysts listed on page 1 of this report will be disclosed in Important Disclosures, Company-specific regulatory disclosures located above in the Disclosure Appendix. KBCMI itself may have a position (long or short) in the securities covered in this research report and may make purchases and/or sales of those securities in the open market or otherwise without notice. As required by FINRA Rule 2241(C)(4)(F), if KBCMI, or its affiliates, beneficially own 1% or more of any class of common equity securities in the subject company(ies) in this research report, it will be disclosed in Important Disclosures, Company-specific regulatory disclosures located above in the Disclosures Appendix. This communication is intended solely for use by KBCMI clients. The recipient agrees not to forward or copy the information to any other person without the express written consent of KBCMI. January 20, 2022 Pg.26 John Vinh, CFA (503) 821-3882 / jvinh@key.com
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