MACom GaN-on-Si milestone, Himax follow-up and trading notes +3

07:37 13-May-22

MACom has announced successful production of its Gallium Nitride on Silicon products with STMicro, which has its own growth ambitions.  With this step, the prototypes can now move on to qualification and industrialization, which is expected this year.  This might not have an immediate impact on MTSI, but the implications for 5G and beyond will not go unnoticed by the industry which put up a fight over the associated patents years ago, only to wound up affirming MACom's intellectual property.  The technology is one of the reasons I added the stock in the first place and this is a big deal that will increase the chances of M&A.

This is all the more true in light of the notes from yesterday's Himax call, which gave some of the first hints that supply shortages and thus inflation in the semiconductor industry may finally be starting to moderate.  One other point that was clear is that Himax is taking market share from Magnachip on AMOLED device drivers.  Consequently, I think the rebound in HIMX is just beginning.  Himax management believes its flat FY22 guidance is quite conservative despite the lower second quarter forecast.  I find this quite plausible in the wake of the Google I/O event, which teased a lot of items that clearly haven't entered production just yet but should wind up using newer, more advanced Emza innovations.  The glasses in particular are another data point leading me back toward staying away from VUZI.

All this puts the opportunity embodied by HIMX and MTSI on par with VIRT, NFE and KNTK.  The difference is that the natural gas picks will be more news driven.  TTF continues to out-price JKM by about 40% through March, and Henry Hub is back up to $7.87.  NFE investors will want to keep an eye on Sri Lanka and the election in Brazil.  The former isn't nearly enough to derail further stock appreciation, but Sergipe does need to get sold to finance American development; keep in mind that hydrocarbon woes and strife aren't exclusive to Europe.  I think it's a bad sign that Shell didn't disclose a price for its sale of Russian retail stations.  I have to reiterate the possibility that the western response to the war winds up being more or less what Putin and Xi want.  Maybe the hydrocarbon export business and bringing the Nords into NATO makes it what D.C. wants too, but the situation puts Aramco ahead of Apple in market cap, though the latter gets some of the responsibility.  The defense industry is the only thing keeping eMagin alive, and it should also go without saying that I won't cover Orbital's first quarter report.

For those who find all this a bit much, there's always telecom and utility yield.  The prices of TU & VOD have dropped further, but so have Canadian and European currencies, to below $0.77 and $1.04, respectively.  That could limit market index upside even after next week with the ECB not hiking until summer, and Vodafone U.K. merger talks don't help the appeal for me either.  Thus, trading in LUMN has been going the other way, as its services look ever more appealing.  The company's dividend announcement should be coming soon and the market reaction will be interesting, but not necessarily positive.  Its Qwest baby bonds might be better for the short term at this point.  With any luck that wraps the week for me.