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InvenSense/STMicro/Watch notes -2

The ST Micro press release, rather than conference call analyzed below, contains the following bullet point:
  • Began ramping production of 6-axis ultra-low-power MEMS accelerometer and gyroscope for Samsung Galaxy smartphones;
It's unclear what the meaning and impact of this is, but I will try to investigate further.  I note that other references from the document to parts confirmed in the Galaxy S6 refer to it as "latest Samsung Galaxy" whereas this point does not.  That could mean that the part is for an older or future Galaxy model.  Curiously, when an analyst tried to ask about the point, he was disconnected.  Listening to the audio, it didn't sound like there were problems with the line itself.

An alternate, and perhaps more likely, interpretation could be that STMicro is available as a second source for the InvenSense part, which may mean no substantial volume associated with the Galaxy phones for STMicro unless InvenSense were to encounter supply problems.  This interpretation would be consistent with the cross-licensing that I mentioned in an earlier update, and also with Rosenblatt's statement that InvenSense will not lose "meaningful" share to STMicro.  The firm doesn't have a wonderful historical record when it comes to InvenSense, but it was right about the chip in Apple's Watch.

This latter interpretation could be a positive for InvenSense, allowing it to optimize manufacturing arrangements, thereby avoiding the inventory problems that have caused trouble in the past.  It could even aid in sales, since InvenSense would be able to claim a valuable built-in second source for its products, with STMicro essentially serving as primary or backup fab, as needed.

Regardless, this definitely has no impact on Monday's earnings report.  I won't be publicizing any of this thinking until after that point, as I try to continue my investigation and look to see if the report gives some further evidence one way or the other.

On 04/30/2015 01:56 PM, Esekla wrote:
I've just been through the STMicro conference call.  Reading between the lines, the company pretty much confirms the Watch motion win, but the reasons are less clear.  Management had comments about how they've been squeezed out of that area over the past few years, but they think this quarter will be a bottom for that segment.  Specifically, they characterized their new gyro chips as "pretty high-performance", which seems to confirm that they are not leading in that way.

Also, estimates from IHS might be taken to indicate that STMicro competed mostly on price, especially in light of comments from Apple CEO Tim Cook that such estimates are wildly inaccurate.  Overall, the only thing that changes from my initial thoughts is a little more confidence that Chipworks was right in attributing the motion chip win to STMicro.