--- the subscriber area has no ads and those above are not selected or endorsed by this site ---


Chipworks says STMicro wins Apple Watch motion slot -3

19:03 26-Apr-15


Assuming Chipworks is right, this development raises a lot of questions, and many excellent ones were posed by readers.  Here's some follow up to Friday's announcement, which was mostly meant to document the news:
could the non-win mean a further pressure on the stock price - mainly due to the psychological factor about stock trading?
It certainly could.  I still believe that the Watch is minor in terms of revenue, but that was not meant to downplay this being an important development.  It's important because it is the first crack of InvenSense's ~100% market share in wearables, and a major one at that.  That alone means that the story will continue to be two-sided, which is not what I was predicting.  It won't cause me to sell any of my existing INVN position, but it does change my expectations of the market, particularly for the period between now and May 4, when InvenSense reports earnings.
are you still sticking with your revenue predictions and do you still think we have high probability of breaking out of the the high end of $15-$17 range
Yes.  The revenue predictions completely excluded the Watch anyway, so they are completely unchanged.  The probability of breakout is somewhat changed, but not nearly as much as you might think.  Much of my prediction was based on two things: the (unchanged) earnings prediction, and market dynamics.  The market dynamics will see the biggest change in retail investors, and they are a relatively minor part of the equation.  Seasoned short sellers and institutional investors will be affected in that they will look to see what everyone else is doing, as per the comments above, but they are not going to overreact or simply assume that this changes the long-term fundamental outlook.
Why do you think STM was chosen over INVN?
This is the key question in all of this, and I think there are two main non-exclusive possibilities:

Performance, particularly in terms of power profile(s).  I doubt STMicro leads in this area, but just matching would still be significant.  Right now, we don't know much of anything about the chip.  From what I've seen, STMicro previously offered chips at this size that incorporated either a gyroscope OR accelerometer, but not both.  Such chips had almost double the power usage of InvenSense's MPU 6500 series (6.1 vs 3.4 mA).  That STMicro now has a chip that incorporates both is a step forward for them, but power usage remains to be seen.  Note that the power usage in either case is small enough that Apple may have simply opted for a suboptimal solution in favor of other characteristics, like price.  Even if details are never identified, we'll be able to draw some important inferences over time, by observing the performance of the Watch.  A key thing to look for will be which features of the Watch can still be used in power reserve mode.

Price: STMicro reports earnings before market open Thursday, and you can be sure I'll be scouring that report for clues.  You can be sure I'll be scouring that report for any clues.  Despite statements from Apple and its fans, I don't see that company as having a history of wonderful internal engineering.  Rather, I think the modus operandi is one of using great macro product design to sell over-priced internal components.  If ST's part is included primarily because of pricing, then I see this development as important only in terms of temporary market perception.
Is there any chance INVN got another win in the watch? Microphone, etc
Yes, particularly for the microphone, but this reduces the chances.  STMicro owns its own fabs, so the possibility that I mentioned previously, that InvenSense provided software or helped design the chip and STMicro produced it is still on the table.  It's hard to say how likely the latter is (certainly not very), but it would fit with the cross-licensing deal that InvenSense and STMicro struck as part of their settlement.  If it is the case, then the big question becomes, "what are/were the compensation characteristics for InvenSense?"
What do you think of management? Comments have been bringing it up as an issue.
Although, I recognize that others out there have different opinions, I have no particular beef with management.  I do think that not depreciating inventory was a mistake, but it's just accounting and presumably all comes out the same in the end with regard to actual profit or loss.  Sentiment is what really changed as a result, and I try to either ignore or profit from that.  As further evidence that many are making too much of the write-down, I note that UDC had a similar write down in the past year.  It helped produce the "last chance sale" that many of my subscribers have profited so handsomely from.

The one question that nobody has asked, but which I would like to know, is what evidence does Chipworks have for saying this is an STMicro chip?  It's not that I doubt the statement.  I just think that knowing the actual evidence might yield further insight.  The only thing I've seen discussed (elsewhere) is the font used for the chip markings.  That's indicative, but hardly determinative.  The Chipworks teardown ends by saying, more next week, so maybe the evidence will become clear.

On 04/24/2015 10:15 PM, Esekla wrote:
As many of you have already seen, Chipworks says the gyro/accelerometer module is from STMicro.  We'll see how INVN responds on Monday.  What will be of more concern to me than the short term reaction is to look for reports in months to come on how the watch performs in terms of battery usage.  Initial reports were not so good, indicating that the Watch has power reserve mode.  We'll see how much that comes into play and interferes with desired functionality. 

Sorry for getting this one wrong.