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Tuesday, January 20, 2015 4:44:22 PM
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Intel: RBC Rebuts JMP Server Worries; Possible Power Mgmt ‘Hiccup’
By Tiernan Ray
TAGS
Following a cut in rating on Intel (INTC) to Market Underperform from Neutral by JMP’s Alex Gauna this morning, RBC Capital Markets’s Doug Freedman comes to the stock’s defense, writing that any slowing that may exist is likely “a lack of supply of Grantley CPU power management solutions.”
Writes Freedman, who has a Sector Perform rating on Intel stock, and a $40 price target, Gauna may be right about some slowdown, but it’s not because demand is weaker, writes Freedman:
A competitor downgraded INTC/reported DCG growth stalling, driven by industry sources in the supply chain. We think that the direction could be accurate, but 1) it is not driven by a demand- related problem, and 2) it probably results in a 3 month delay and is caused by a technical problem in the custom server CPU power MOSFETs (pictures shown on pg. 3 and 4). Infineon claims a leading market share for Grantley power, and we are hearing from industry sources that Infineon has had difficulty building MOSFETs in the volume needed to support the Grantley ramp. We believe INTC shipped as many server chips as they could in the DecQ, and there was no inventory build.
Infineon (IFNNY), he notes, had supplied Intel with “MOSFETs” for power management for “Grantley” server chips, but is no longer supplying those and “has encouraged customers to redesign motherboards to accommodate competitor solutions,” according to Freedman’s “industry sources.”
While that’s a loss for Infineon, it could conceivably be a benefit to other power-management chip makers, such as Fairchild Semiconductor (FCS), Intersil (ISIL), Monolithic Power (MPWR), Maxim Integrated Products (MXIM), and Texas Instruments (TXN), writes Freedman. However, “the volume shift may not be large enough to materially affect any ‘winner’,” he adds.
Here’s his math on the market value at stake in those power chips:
If Grantley is 10-15% of server CPUs, maybe 1-1.5mil units were affected, meaning $10-$20mil of revenue for the market by our estimates. However, if we include memory power, we estimate the total increases to $40 in power management per board or up to $80m/qtr in market share shift that could result.
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