3D NAND Could be Incremental Revenue for Cypress Semi (CY) - Mizuho

Mizuho analyst, Vijay Rakesh, believes Cypress Semi (NASDAQ: CY) foundry partner in China, XMC, could break ground on a new 300mm, 32-layer 3D-NAND production facility. This could contribute revenues as early as CY17.

In February 2015, Spansion (now part of CY) licensed 3D-NAND IP to XMC (Wuhan Xinxin Semiconductor Manufacturing), a 300mm foundry in Hubei, China. Checks indicate XMC could break ground on a new 300mm 3D-NAND facility in Hubei province sometime in C1Q16 for 3D-NAND production in early 2017.

The analyst believes that XMC has taped out 32-layer 4xnm 3D-NAND at its current facilities. CY could benefit from 3D-NAND licensing (potentially 3-7% of XMC's 3D-NAND sales) if XMC successfully ramps 3D-NAND in 2017. The 3D-NAND market is expected to be $10-11B (25% of a $40B NAND market) by 2019E.

With softer end demand limiting inventory burn, CY should be done burning inventory by mid-Q3. By mid-2016 there should also be a fab-4 consolidation, to help slowly layer in $10M/qtr of depreciation and cost synergies into the model and drive 200-250bps of GM improvement. Lastly, better Fab 25 utilization and mix should drive CY towards its L-T 50/30/20 GM/Opex/OM targets.

Another potential positive for the stock is that the analyst believes T.J. Rodgers is buying back stock after a seven year hiatus.

No change to Buy rating or $18 PT.

For an analyst ratings summary and ratings history on Cypress Semi click here. For more ratings news on Cypress Semi click here.

Shares of Cypress Semi closed at $9.52 yesterday.

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