Maxim`s Results Propelled by Samsung Galaxy S4 Launch



Maxim Integrated reported solid fiscal third-quarter earnings on Thursday. The firm’s fourth-quarter revenue outlook was modestly lower than our expectations, but still point toward healthy analog chip demand from Samsung, and a recovery from a recent industry downturn.

Maxim’s analog chip sales were $605 million, at the high end of the firm’s forecasted range of $580 million-$610 million put forth in January. Sales were flat, sequentially, and up 6% from the year-ago quarter. Maxim’s consumer revenue was up 6% sequentially, thanks to the company’s design wins in Samsung’s upcoming Galaxy S4 smartphones. Meanwhile, sales in Maxim’s computing segment, which includes servers but also notebook PCs, were down 14% sequentially due to a dismal PC end market.

Higher factory utilization and lower inventory reserves contributed to a 220 basis point improvement in gross margins to 62%. For the June quarter, Maxim expects revenue in the range of $610 million- $640 million, which would represent 1%-6% sequential growth. Maxim usually sees higher growth in the June quarter, as Samsung typically launches its premier smartphones in that time frame, but some of Maxim’s chip orders were placed by Samsung early, and were recorded as March revenue instead. As a result of these earlier sales to Samsung, Maxim expects flattish revenue from the smartphone market next quarter.

In total, Samsung expects revenue from the S4 launch to roughly mirror what was earned from the S3 over the past year. Maxim appears to have modestly lower dollar content in each Galaxy S4 sold, but higher expected unit sales of the S4 should offset this issue, and we expect Maxim’s revenue from Samsung to grow in the long-term as Maxim continues to gain design wins in virtually all of Samsung’s marquee products. Outside of smartphones, Maxim’s expectation for industrial chip growth is consistent with outlooks provided by broad-based analog peers such as Linear Technology LLTC . All in all, we think Maxim is faring quite well in the analog chip space, with a strong partnership with Samsung in all of its high-end devices as icing on the cake in terms of revenue growth.

Looking into Maxim’s content in Samsung smartphones, the firm held an important power management integrated circuit, or PMIC, in versions of the Galaxy S3 that used Samsung’s internal processor. The S3 and S4 are rare in that Samsung will source multiple processors for the same phone design, alternating between its internally developed Exynos processor, or using Qualcomm’s QCOM Snapdragon chips, depending on the region where the handset is sold. In the Qualcomm version of the S3, Maxim did not have the PMIC socket, as Qualcomm sold a power management chip alongside of its processors. Maxim did have other analog content within these versions, but the company’s dollar content in the S3 was more favorable in devices with Samsung’s Exynos processors where it supplied the full PMIC.

Maxim will likely have to continue to battle with Qualcomm and Samsung’s internal power management chip designs in future smartphones and tablets, but we’re encouraged that Maxim’s diverse product portfolio and tight relationship with Samsung allows the firm to win additional dollar content. Again, as Samsung’s device volumes are expected to grow at a healthy pace in 2013 and beyond, higher unit volumes should more than offset modest dollar content declines in the S4, as Maxim indicated that it expects revenue from Samsung to grow in the long-term.

 

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