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[Comparison] Can Dnex and Silterra turnaround?

Shiba_Capital
Publish date: Sun, 08 Aug 2021, 10:30 PM
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**Disclaimer: Everything posted here is for infomational purposes only and do not constitue any investment recommendations.**

Lots of investors are talking about Silterra.

"Oh DNeX will be a fantastic company, even my aunt is buying their shares."

"Look! Foxconn invested in them too"

But do you really understand Silterra?

To begin we will have to go through the simplified version of the semiconductor chain later on.

Silterra is in the foundry segment where TSMC is arguably the King of Foundries.

Although being in the most vital part in the semiconductor chain, Silterra is still raking up losses as at the financial year end of 2019. 

 

DNeX, Ownership Breakdown

Speaking of Silterra, we must bring up Dnex onto the table. Dnex has a diverse business portfolio from technology to the energy industry (which investors will recognise the name Ping Petroleum) and now wafer manufacturing.

Dnex acquired 60% of Silterra from Khazanah Malaysia where the remaining 40% is contributed by the "CGP fund* for a total price of RM 273 million.

(*CGP is a VC and private equity investor in China, where this semiconductor investment initiative is backed by the state)

 

 

Quick refresh on semicon value chain

As above, YES. Silterra is technically in the same business as TSMC. Here, we will have a short and sweet refresher for the semiconductor value chain.

Majority of Malaysian tech companies are focused in the downstream business in Assembly and Testing, Manufacturing of Automated Test Equipment (ATE) etc.

 

Foundry Process Roadmaps

However, it is the technology equipped by the companies that separates the both. TSMC’s advanced technology allows them to die transistors with a gap of 3nm; where Silterra can do it at 90nm. This also explains why TSMC is regarded as the best in the game.

Remember: Smaller = More Power = Better

 

But is smaller always the better case? (Not for everything tho)

Some devices like your remote controls or your CCTV system at home don't really need the most advanced chips to operate because they are not expected to be used in rocket science.

As expected, more advanced chips will certainly mean the products that used the chips are going to be pricier. You don’t want your TV remote control to cost you 1000 bucks right. When chip size is not a necessity, manufacturers can be more profitable using larger and less advanced chips for their products.

In addition, it takes a huge sum of money in researching the most advanced manufacturing technology. For context, TSMC spent an astounding $5.97 billion (equivalent to RM 25.19 billion) in CapEx. You can buy up the whole Inari company with that money.

Silterra has More-than-Moore as one of their key operation objectives. They strive to serve a wider range of customers to achieve economies of scale such as Analog and RF devices (Yes, Inari), Sensors and BioChips.

 

Clients & Products

Let’s have a look at Silterra’s clients, many big names here.

Some brief introductions for some well-established but lesser-known companies in Malaysia:

Mediatek – Designs chips for smartphones like Xiaomi, Oppo, RealMe, Vivo; Asus Chromebooks; Routers like D-Link, Linksys and TP-Link.

UMC – A foundry similar to TSMC and Silterra. They manufacture mobile processors, graphic processors, Wifi and Bluetooth chips etc. Clients are AMD, Qualcomm, Infineon and many more.

MagnaChip– Korean based semiconductor firm, which is one of the top OLED display segment players

Therefore, you can see chances that some of your daily used products have chips that are made by Silterra.


Product Application 1: PMUT

The largest focus for Silterra currently is the manufacturing of sensors. Their patented PMUT technology relies on ultrasound to capture movements (like your smartphones can sense your movements).

 

There is a huge TAM (Total Addressable Market) for sensors in the market currently, where another significant application is in wireless earbuds like the Apple Airpods where users can control functions using a finger’s swipe.

Product Application 2: Silicon Photonics

Silterra’s own improved Silicon Photonics chips are superior to the ones currently in the market. Their in-house technology allows these chips to be less energy consumptive hence requires less cooling. This is a massive game changer for the full adoption of cloud computing, IoT and autonomous vehicles in the future.

 

Comparison to TSMC

Looking back at TSMC, no doubt they crushed Silterra in terms of technology and has a wider range of applications as above. Their 3nm technology allows devices to have much more compact sizes where you can see your Iphones and Macs are getting thinner and thinner over the years.

(Their largest clients are Apple and Nvidia, so you know…)

Silterra’s Outlook

There are still huge opportunities out there for Silterra to capture if the capital injection of RM 200 million from Dnex and the CGP fund is going in the right direction in terms of capital expenditure and client acquisition.

One of the most significant news recently is the long term partnership with Chipone Beijing to supply its wafers across several years. This shows that they have confidence in Silterra’s ability to do their craft.

Foxconn

Last but not least, we must acknowledge the investment made by Foxconn in Dnex.

Felt bad for him to be honest, Foxconn lost the original bid to acquire Silterra as a whole. Recently, Foxconn decided to take a minority stake in Dnex to be involved in the operations and future developments of Silterra. But unfortunately, Dnex’s continuous fund-raising activities have diluted his holdings over time.

That’s all for this week’s educational post on Dnex and we hope everyone enjoyed it.

Let us know which company you want to learn more about and we might feature it soon.

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4 people like this. Showing 14 of 14 comments

Mimimomochi

very nice comparison. Hopefully good news comes

2021-08-08 22:36

cumcumshot

This article is out at a good timing when DNex closed above 80c with volume on last Friday. Are you ready to push DNex higher?

2021-08-09 00:32

Bgt 9963

Post removed.Why?

2021-08-09 08:58

enning22

if you run a tech company like a social welfare establishment, the nothing can achieve.
reform is the key word.

2021-08-09 09:12

Mingho

@enning22 ikr. hopefully the reform can be successful.

2021-08-09 12:12

Tanleechoo

a good understanding rather than financial data to analyse the co.. the business model decide the financial result

2021-08-10 00:41

enning22

don't be silly, "silterra"business model? nothing but loss making, year after year.

2021-08-10 14:39

Mingho

relax @enning22! lets be constructive and nice to each other. Your point is valid as well. Have a nice day~

2021-08-10 14:47

AlsvinChangan

Ask at right place

i3 lotsa Fortune tellers

2021-08-10 14:55

Mimimomochi

DNeX recently obtained new contracts and Ping doing acquisition at UK oilfield. Good for the company and expect more earnings. Hopefully silterra will make a great comeback too.

2021-08-10 20:56

Bgt 9963

Post removed.Why?

2021-08-11 08:48

Birdie

You are grossly misleading your readers. Silterra is not a foundry company .A big lie. It makes wafers, mainly.

2021-08-15 00:09

Bgt 9963

Post removed.Why?

2021-08-15 10:34

Mingho

@birdie do some fact check before accusing others. Its not that hard.

https://en.wikipedia.org/wiki/Foundry_model
https://www.silterra.com/index.php/about-us/corporate-profile

2021-08-15 15:00

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