Brad Gastwirth, Wedbush Securities Chief Technology Strategist joins the Yahoo Finance Live panel to discuss 2020 tech trends + 2021 tech predictions.
Video Transcript
ZACK GUZMAN: Welcome back. 2020 was a banner year for some semiconductor companies, maybe not all, but some. Not only did we see the largest ever deal in the space between Nvidia and Arm, which has yet to be approved, but we also saw a huge demand for all kinds of tech gadgets in the lockdown. So should investors be bracing for more of the same in 2021?
Well, here to break that down for us is Wedbush Securities Chief Technology Strategist Brad Gastwirth joins us once again. Brad, good to be chatting with you here, man. First, I guess it's interesting because in most of the cases where we saw a pull forward in demand, we later saw a bit of a cooling off.
I mean, you can point to maybe Netflix subscriptions as an example of that earlier in lockdown. But you say chip demand is still going to be strong next year as well. So what's the thesis there?
BRAD GASTWIRTH: Yeah. And I mean, it's really the right question, Zack. So in terms of semiconductor demand, one of the more interesting things that's taking place that I don't think a lot of the regular investors who are not tech specialists truly understand or appreciate is the content that's going into 5G devices increases dramatically. And what that's causing is really a shortage in foundry, which is where these chips are built.
So when you actually have a shortage of where these chips are built and an increase semiconductor content, there's interesting dynamics. So you're going to see prices rise, which we've seen. I do not expect this to subside.
I think you will see prices rise across a lot of commodity-like products throughout 2021 and likely into 2022. And then you also have really strong demand from many different secular growth drivers with AI, 5G. You have this strong PC upgrade cycle. So it's really almost a perfect storm scenario for the semiconductor space.
AKIKO FUJITA: Brad, when you talk about that, though, and the ability to scale with that demand, which company do you think is the best positioned right now in the chip space?
BRAD GASTWIRTH: Yeah, Akiko, and that's a great question. And so it really depends on investor's appetite and time horizon. So everybody has a different investment horizon. I think if you look at a company like Western Digital-- we are really looking for an undersupply situation in NAND. NAND is the storage used to store digital photos, et cetera.
And looking at next year, you have several drivers. So not only are the gaming consoles have switched from hard disk drives to solid state drives which use NAND, which is-- it's a change. Every other gaming console in the last cycles have always used hard disk drives. So you have that major upgrade cycle and change going into next year.
We expect content and handsets to increase dramatically, meaning if you look at iPhones and other smartphones, you've really seen 256 or 512 being the higher end of capacity. I think in 2021 and beyond, you're going to start to see one terabyte in the high end, and that really increases the consumption in the NAND market. Western Digital plays right into those trends and will benefit from this.
ZACK GUZMAN: And Brad, I said it was a banner year for some, not all, chip companies. That would be a nod to Intel. We're still seeing shares off by about 20% here in 2020. When you look at that story in 2021, what are your expectations for them to maybe turn that around? And what might be the biggest headwind for them in that strategy?
BRAD GASTWIRTH: Yeah, great-- great question, Zack. So Intel certainly has had struggles. And it's no surprise that on the manufacturing side they've struggled with their latest generations of processors. One of the things that we're expecting in 2021, which, again, I do not believe the Street is expecting, is Intel will likely outsource some of its manufacturing to a third party, like a Taiwan Semiconductor. So we do believe that likely happens with some product lines, not all.
And I think that's one, because they've had some situations where they've had some difficulties hitting targets and coming to market on time. I think for Intel to benefit next year, you have to see them really hit their product roadmap, which I think is a question-- a big question mark. I don't think you can say that's that likely. I think it's a question mark.
But if they do hit that product roadmap and they're able to all of a sudden deliver competitive products, that will help out the company. I think as they shift to third party for the manufacturing side, there's really a bifurcated investment group. I think some people really like that, some people really do not like that. You certainly have an interesting thing on the cost structure for that. And all of these things are certainly going to be watched by us in 2021.
AKIKO FUJITA: Brad, you just alluded to TSMC, one of many chip companies that have been caught right in the middle of this tension between the US and China. There does seem to be this thinking that with a new administration coming in, while there may be some tension still, the rhetoric, at least, will be tamped down. TSMC, for example, went ahead and proposed this big plant in Arizona to try and get in the good graces of the Trump administration. Now that you've got a Biden administration coming in, does that shift up the strategy for some of these chip makers?
BRAD GASTWIRTH: Yeah, great question, Akiko. And I don't think it's going to change that much here in the near term. I think the big question really is, how does the other side respond? And I think with the Biden administration, you're going to see a little bit of a pause towards the US.
But I do think you're going to see these-- many companies overseas that are looking for new manufacturing sites. I think Southeast Asia is going to benefit tremendously, so countries that are really next to waters, so Cambodia, Laos-- Cambodia, Laos, Vietnam. I think that's-- that Southeast Asian region will benefit.
In the US with TSM, I mean, TSM is going to continue to benefit for many reasons. One, as we alluded to earlier, the foundry, the tight foundry situation is not going to subside any time soon. And in time when somebody is also the leader in the space, so not only on the tight foundry will benefit them on pricing, but they also make the most advanced chips. And they're going to benefit with AI and 5G needing the most advanced nodes, which they make, they're going to benefit.
The Link LonkDecember 30, 2020 at 12:55AM
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Intel will likely outsource some manufacturing third party, like a semiconductor: CTS - Yahoo Finance
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