Description
Long SiTime
SiTime is the leader in semiconductor MEMS timing devices that are critical in virtually all electronics devices, they keep the “clock” ticking properly. They were founded in 2005 in Silicon Valley by Stanford engineers. Later they were acquired by Japanese firm MegaChips that spun them off in 2019 via an IPO.
They are the leader in MEMS-based (i.e. silicon based) oscillators and are steadily taking market share from the incumbent legacy technology of quartz based oscillators which still have 90%+ share. It reminds me of a similar story to Kionix who invented MEMS based accelerometers decades ago which displaced mechanical based systems, first in automotive (pre-smart phone era), acquired by Rohm in 2009.
The high level thesis is that semiconductors have exponential improvement tailwinds vs linear improvement mechanical improvements in the quartz architecture and it’s just a matter of time until the market moves over as the MEMS tech steadily gets cheaper and better over time. SiTime is by far the leader in this architecture and stands to drive and benefit from this inevitable transition. The main question is timing and ROI and execution which I have some views on but the pathway is lumpy as they get different design wins over time. Today SiTime has ~90% share of the MEMS timing market which is only ~5% of the total timing market (rest quartz).
Good background on the fundamentals of timing devices and different architectures: https://www.fabricatedknowledge.com/p/timing-market-primer-and-overview
Latest investor presentation I could find to link to a bit dated but helpful market overview which I won’t repeat: https://www.scribd.com/document/709442855/SiTime-%ED%9A%8C%EC%82%AC%EC%86%8C%EA%B0%9C%EC%84%9C-Investor-Presentation-2023
Full disclosure: i am long the stock.
The primary market drivers that are demanding more precise timing are:
-5G
-Data Center
-Automotive (esp ADAS electronics)
-Aerospace
Management forecasts a growth rate of 25% CAGR for a long period going forward as this market share dynamic plays out and they chip away at market share.
The reason for the opportunity / insight on VIC and why it’s not just a growth/VC play is there was a one-time supply chain disruption in 2022 that cut the stock by 2/3rds (since rebounded somewhat). And at 20x EV/Revs it’s not a typical ‘cheap’ value stock but 60% gross margins and software-like operating leverage could lead to a 3-4x in 5 years as the growth path becomes clear again after some recent disruption.
I do not hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.
Catalyst
New design win announcements over the next year make it clear they are taking share