Japan's Renesas Electronics (OTCPK:RNECY)
(6723.T) is a microcosm of what worries me about the semiconductor
industry heading into 2019. Elevated lead times and strong orders lead
Renesas, its distributors, and its end-customers to build up
inventories, and those inventories eventually got much too large,
leading to a painful reset as demand has tapered off. In addition to
this inventory correction process, there are growing worries about auto
unit demand growth in 2019, not to mention demand from factory
automation, appliance, and consumer device end-markets. More specific to
Renesas is also, I believe, a growing concern over how the company
stacks up competitively in the evolving auto semiconductor landscape.
Although
I take the risks of share loss to competitors seriously, I think the
shares are pricing in an extreme level of pessimism for Renesas's
future. Even with near-term margin issues likely capping some of the
upside, I believe the shares are just too cheap for one of the global
leaders in microcontrollers and a company set to benefit from the
acquisition of Integrated Devices.
Read more here:
Renesas Pummeled On Inventory Corrections And Worsening Macro
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