Silicon Investor - Silicon Motion Inc. (SIMO)

[Elroy] youtube.com

Elroy — 8/28/2026 9:45:37 AM

[Elroy] China's YMTC aims to become the world's largest NAND maker by the end of 2027, r...

Elroy — 8/27/2026 2:03:56 PM

China's YMTC aims to become the world's largest NAND maker by the end of 2027, report says — company plans to overtake Samsung and SK hynix

tomshardware.com

This is interesting. I don't know anything about YMTC's controller design capability, and whether they have any OEM progrms with SIIMO.

Anybody have any idea?

[Anonymous895] I imagine most of Phison's controllers are eMMC, hence the low overall ASP. I th...

Anonymous895 — 8/16/2026 10:09:54 PM

I imagine most of Phison's controllers are eMMC, hence the low overall ASP. I think that your range of prices can all use about a double on the high end of the range, for ballpark purposes.

Phison's client SSD modules would be included mostly in their Embedded ODM module section and partially in the Industrial module section.

[Elroy] Got it. And since Phison doesn't break out "client SSD modules" (for example) t...

Elroy — 8/16/2026 7:56:40 AM

Got it.

And since Phison doesn't break out "client SSD modules" (for example) there's no really good way for us to know Phison's client SSD controller market share (consisting of client SSD discrete controllers and client SSD modules).

I'm sort of surprised at Phison's low $1.00 per chip controller ASP.

I haven't head actual prices from SIMO for a while, but my guess discrete controller prices are roughly as follows:

eMMC - 40-50 cents
UFS - $1.00-$1.50
client SSD - $4-$5
Mon Titan enterprise controller - $45-$65

Any idea if that's in the ballpark?

[Anonymous895] In case I wasn't understood clearly, I meant that SIMO does not count Phison's m...

Anonymous895 — 8/16/2026 12:54:22 AM

In case I wasn't understood clearly, I meant that SIMO does not count Phison's module sales as part of the merchant market when they say what percentage of the merchant controller market SIMO has.

[Elroy] I think, although I'm not sure, that SIMO counts these module sales as captive c...

Elroy — 8/14/2026 10:01:41 AM

I think, although I'm not sure, that SIMO counts these module sales as captive controllers and does not include these in their merchant controller market share figures.

In SIMO's case it has historically been almost all controllers (of various sorts) and almost no "modules". So their sales have been unit driven and much less subject to memory price fluctuations. They have always had an SSD solutions segment, but it floundered and wasn't a stock price driver.

SSD solutions used to be enterprise SSDs (from the Shannon acquisition) but it never really took off. Now the "solutions" segment is autos and other modules, and also a new boot drive product which is a mega growth driver (and a main reason for the big convertible capital raise).

To my knowledge SIMO doesn't currently have an enterprise SSD business of any size, they instead sell enterprise controllers (Mon Titan) to enterprise SSD makers, or directly to the cloud service providers who buy NAND memory and make their own enterprise SSDs.

Neverthelss, the SIMO "solutions" segment (which is where modules reside) has exploded from less than 5% of sales a year ago in Q2 to 30% of sales in Q2 2026. So this segment is now more aligned with the Phison module business model. It includes Ferri products (modules for point of sales devices, video surveillance cameras, etc.), auto modules and a new "boot drive" segment. The year over year explosion in sales is due to both market share gains, market growth, and of course the massive increase in NAND memory prices from Q2 2025 to Q2 2026.

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Phison's increase in Op Ex is also phenomenal. R&D went from 2,248 Taiwan money in Q2 2025 to 15,099 Taiwan money in Q2 2026. Up 6.5x, while sales were only up 4x! That's insane.....

[Anonymous895] I think a lot of your questions re Phison will be answered if you look at their ...

Anonymous895 — 8/14/2026 9:30:13 AM

I think a lot of your questions re Phison will be answered if you look at their materials some more. Here is their slides for Q2:
www.phison.com/wp-content/uploads/2026/08/2Q26_Phison-Earnings-Call_EN_Official_uploaded-version.pdf

Here is the location for the slides for their past quarters:
www.phison.com/investor-relations/shareholder-services/investor-meeting-information/

Page 5 of the slides gives a detailed breakdown of their different business segments and what goes into each one. Page 9 shows the progression of their gross margins; the recent jump up is clearly AI-related, although I admit I can't explain why their gross margin is so high. Unless they have a long-term supply contract with Kioxia on favorable terms (or older terms that have yet to roll off to new prices)? Or possibly they simply stocked up last year and are selling at this year's prices from last year's inventory? Upon reflection, that would seem to be the most parsimonious explanation.

Phison is both lower-end (look at their controller ASPs) and higher-end (they generally come out with the latest and greatest first, e.g., PCIe5 and now PCIe6, etc.) at the same time. What they are less of is the mass-market high-volume middle, relative to SIMO.

SSD controller sales in modules are not counted as controller sales. And I think, although I'm not sure, that SIMO counts these module sales as captive controllers and does not include these in their merchant controller market share figures.

Here's an article from a few years ago describing Phison's approach (a lot of white labeling for other major companies) and lists Seagate as a major customer: www.blocksandfiles.com/flash/2023/06/12/phison-is-the-largest-ssd-supplier-youve-never-heard-of/1601505

[Elroy] I'd be interested to hear / read your thoughts on other items regarding Phison. ...

Elroy — 8/14/2026 8:36:08 AM

I'd be interested to hear / read your thoughts on other items regarding Phison.

They reported gross margins of 65% in Q2 2026. How are the able to achieve that? I would think their gross margins on controllers are similar to or below SIMO's given that the ASP of their discrete controller sales is about $1.00 (ie, low end). And for modules, they need to buy NAND memory and then mark it up more than 65% to achieve corporate gross margins of 65%. SIMO says their module business (boot drives, not sure about autos) is expected to achieve gross margins of 40%-45%. How is Phison getting such elevated gross margins when the NAND makers themselves are getting gross margins around 85%. Any idea? Does Kioxia sell discounted NAND to Phison?

What's your general take on the competitive position of SIMO versus Phison? Is one more high end than the other? Are their served customers meaningfully different in any way, and if so what way?

There was an earlier quote (maybe 6-7 years ago) where SIMO said their client SSD business was about 4x the size of Phison's client SSD business. No idea if that's accurate at all, and it's hard to tell due to Phison putting some client SSD controllers into modules, and so perhaps not counting them in their client SSD controller sales. I'd be curious to read your comparison on the competitive postioning of the two. SIMO touts NVDA Vera Rubin, Google TPU, a major server maker and a major telecom equipment company as SIMO boot drive customers. Who are Phison's major well known customers, any idea?

[Anonymous895] Phison most certainly does break out module sales vs. controller sales. In fact,...

Anonymous895 — 8/13/2026 10:48:10 PM

Phison most certainly does break out module sales vs. controller sales. In fact, they give both the numerical amount of items sold in each category as well as the revenue for each category, so you can work out their ASP as well. They do this in their annual reports. For example, here is their 2025 annual report: www.phison.com/wp-content/uploads/2026/06/2025_.pdf

On page 90 of the PDF (which is labeled page 86 on the bottom of the page), they give the breakdown I just referred to for 2025. You can find the equivalent breakdown for each prior year in the corresponding annual report by searching for the word "module" which occurs only a few times per report. Note that the revenue figures there are given in thousands of NTD (New Taiwan Dollars; ~32 NTD = 1 USD). So, translating into familiar USD, they sold ~$1.625 billion USD of flash memory module products in 2025, and ~$437.5 million of controllers over the same period.

The ASPs for the modules was ~$11.68 and for the controllers was ~$0.96.

This year, they're seeing a huge uplift from AI-related sales, so I imagine that ASPs are significantly higher for them, but we won't find out precise numbers until the 2026 annual report comes out around May 2027. The latest data, for 2026 Q1, only lists the revenue but gives you no way to find the ASPs and can be found here (www.phison.com/wp-content/uploads/2026/06/2026-First-Quarter.pdf) on page 34 of the PDF.

[Elroy] SIMO is now full of cash....... Silicon Motion Technology Corporation Announc...

Elroy — 8/13/2026 7:02:53 PM

SIMO is now full of cash.......

Silicon Motion Technology Corporation Announces Closing of Upsized Offering of $1,150,000,000 of 0.00% Convertible Senior Notes due 2031

Offering includes the exercise in full of the initial purchasers’ option to purchase an additional $150 million principal amount of NotesTAIPEI, Taiwan and MILPITAS, Calif., Aug. 14, 2026 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion” or the “Company”), a global leader in designing and marketing NAND flash controllers for solid-state storage devices (“SSDs”), today announced the closing of $1,150,000,000 aggregate principal amount of its 0.00% Convertible Senior Notes due 2031 (the “Notes”), including the exercise in full of the option granted to the initial purchasers to purchase an additional $150,000,000 aggregate principal amount of Notes. The Notes were issued in a private offering to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933, as amended.

“This milestone transaction was significantly oversubscribed and attracted broad institutional support and enabled the Company to upsize the offering from the initial $800 million target to $1.15 billion, on pricing terms among the most favorable for a semiconductor issuer in the convertible bond market. The transaction significantly strengthens the Company's balance sheet and furnishes the capital required we expect to accelerate growth in our rapidly expanding Enterprise Boot Drive Storage and Ferri for Automotive and Physical AI solutions businesses. Demand for our solutions products continues to expand, and collectively they now represent nearly 30% of our revenue in the second quarter, compared with less than 5% one year ago. With this new $1.15 billion facility at 0%, we believe that we can secure the components needed to support multiple ramps, hold shareholder dilution to a minimum, and convert the growing momentum into profitability and strong cash flow,” said Wallace Kou, Silicon Motion’s President and Chief Executive Officer.

The Notes will mature on August 15, 2031, unless earlier repurchased, redeemed or converted. The initial conversion price of the Notes is approximately $380.50 per American depositary share of Silicon Motion (each, a “ADS” and collectively, the “ADSs”), each representing four ordinary shares of Silicon Motion, par value $0.01 per share. The initial conversion price represents a premium of approximately 65.0% over the last reported sale price of $230.61 per ADS on the Nasdaq Global Select Market on August 10, 2026. The conversion price will be subject to adjustment upon the occurrence of certain events.

The net proceeds from the issuance of the Notes were $1,127 million, after deducting the initial purchasers’ discounts but before deducting estimated offering expenses payable by Silicon Motion. Silicon Motion intends to use the net proceeds from this offering for general corporate purposes and to repay amounts outstanding under its credit agreement. Pending the use of the net proceeds from this offering as described above, Silicon Motion may invest the net proceeds in short-term, investment grade, interest-bearing securities.

Silicon Motion will settle each conversion by paying the principal amount (or, if less, the conversion value) of the Notes in cash, and any conversion value in excess of the principal amount will be settled in cash, ADSs, or any combination thereof, at Silicon Motion’s election.

[Elroy] Ok, well that's not as good news. I didn't even know that Phison was in cell ph...

Elroy — 8/13/2026 2:39:13 PM

Ok, well that's not as good news.

I didn't even know that Phison was in cell phone controllers. I find it hard to know what Phison is doing in general since I'm not used to how the Taiwan stocks report to the public, and they don't break out controller sales versus module sales.

Do you know much about SIMO's OEM controller programs with NAND makers? I don't.

[Anonymous895] They're not referring to the OEM market for cellphones, computers, and gadgets. ...

Anonymous895 — 8/13/2026 1:32:34 PM

They're not referring to the OEM market for cellphones, computers, and gadgets. They're referring to the retail market, i.e., where consumers purchase aftermarket SSD drives to add to their computer or a portable one to take with them. You can see this because, both in June's and July's monthly press release, they tout their share gains in mobile controllers at the same time as saying that revenue from the retail storage market is on its way to decreasing as a percentage of sales to under 5%. They are not claiming to be pivoting from mobile controllers (or from OEM computer SSD's or from IoT gadgets).

[Elroy] The current state of PCIe 6.0 SSDs and controllers — Marvell, Phison, and SMI pr...

Elroy — 8/13/2026 11:58:32 AM

The current state of PCIe 6.0 SSDs and controllers — Marvell, Phison, and SMI prepare controllers as drives finally come to market following years of delays

tomshardware.com

Hmmm, it's behind a paywall.

Never mind....

[Elroy] Phison announced their Q2 2026 results today. I like this comment from the pres...

Elroy — 8/13/2026 10:40:29 AM

Phison announced their Q2 2026 results today.

I like this comment from the press release:

We will focus on enterprise, AI, and customized storage solutions while significantly reducing our reliance on low-margin, standardized retail markets.

This means I think SIMO will become the only merchant NAND flash controller maker pursuing gadget, cell phone and PC markets. Those markets may not have much growth, but they are huge (and reliable) in number of units per year.

SIMO will have a few years of market share gains in controllers for consumer devices, and then a cash cow until some new entrant enters the low low end (probably from China) and tries to win on price.

[Elroy] That makes sense. The conclusion is the $380.50 SIMO equity call is not going a...

Elroy — 8/11/2026 9:47:55 AM

That makes sense.

The conclusion is the $380.50 SIMO equity call is not going away.

Lets see, assuming the over allotment exercises, SIMO has raised $1.15b.

The conversion price is $380.50.

$1.15b/$380.50 = about 3 million.

Is it accurate to say SIMO has raised the funds at zero percent interest but also sold 3 million shares worth of $380.50 calls (for nothing)?

If SIMO gets to $600.50 by 2029, then $600.50 - $380.50 = $220.

SIMO can redeem the notes for $1.15b cash + $220 x 3 million (cash or stock)?

That sounds expensive.

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If SIMO today were to buy a 2031 $380 call option on 3 million shares, then that would turn the convertible debt into something similar to regular debt with the option cost amortized over five years being the interest rate, right? I wonder if they're doing that?

I think SIMO could easily be $1,000 by 2029.

[Anonymous895] When I gave AI the press release, it said that special interest generally means ...

Anonymous895 — 8/11/2026 9:17:19 AM

When I gave AI the press release, it said that special interest generally means zero if there was no breaches of covenants, but that the redemption call generally allows the noteholders to convert early (as you recall the noteholders can convert early under certain conditions; the AI is saying that this would be one of them). Which they would all do. In other words, if SIMO trades above 130% from the conversion price (=$494.65) for a specified time (say, ten trading days), SIMO would then be able to force the noteholders to convert at that point (at which point the stock might already be 150% past the conversion price, or may not), limiting the ultimate payment they need to make. If this takes a while to happen, then SIMO got the $1 billion loan for a while with interest. If it happens very soon, then the interest paid is too high.

[Anonymous895] Your guess is still ridiculously silly. It isn't undefined. It is private inform...

Anonymous895 — 8/11/2026 9:07:05 AM

Your guess is still ridiculously silly. It isn't undefined. It is private information that they didn't tell you. The one thing that is certain is that it isn't negligible. It is basically 100% certain that is more than the conversion at that point will get them (i.e., > $456 for every $1,000 of notes), as they will then be giving up any further optionality of continued growth. You're simply being obstinate in your not understanding how these things work.

[Elroy] Silicon Motion Technology Corporation Prices Upsized Offering of $1.0 Billion Co...

Elroy — 8/11/2026 7:46:49 AM

Silicon Motion Technology Corporation Prices Upsized Offering of $1.0 Billion Convertible Senior Notes due 2031

The initial conversion rate of the Notes is 2.6281 ADSs per $1,000 principal amount of Notes (which represents an initial conversion price of approximately $380.50 per ADS). The initial conversion price represents a premium of approximately 65.0% over the last reported sale price of $230.61 per ADS on the Nasdaq Global Select Market on August 10, 2026. The conversion rate and conversion price will be subject to adjustment upon the occurrence of certain events.

No definition of "special interest".

I think if the notes trade at 130% of $380.50 by 2029, SIMO can redeem them for principal only (plus special interest, which remains undefined, so my guess is it's negligible).

I don't see why a lender would make this loan. If SIMO stock reaches $550 in four years, SIMO can redeem the loan with principal only?

[Elroy] SIMO controllers are in this one..... Memory drives 62% of Nvidia Vera Rubi...

Elroy — 8/10/2026 10:38:27 PM

SIMO controllers are in this one.....

Memory drives 62% of Nvidia Vera Rubin's cost — SOCAMM2, not HBM4, leads the bill

digitimes.com

[Elroy] From MU's presentation today at a Keybanc conference.... ...since our earnings,...

Elroy — 8/10/2026 10:13:36 PM

From MU's presentation today at a Keybanc conference....

...since our earnings, our aggregate demand signals from our customers have increased even further. Now we have said that we do expect these very tight industry conditions to continue beyond calendar year 2027. Based on these increased signals of demand from our customers, we now expect that 2027 calendar year will be even tighter than 2026 because the growth in demand that is taking shape is faster than the growth in supply for calendar 2027 on an industry basis.

we still don't have line of sight as to when the supply is going to be able to meet demand because demand continues to escalate at a very rapid pace over time.

... in the data center where quite often, we are not able to meet any more than half of the demand our customers have.

... each single humanoid robot is expected to have hundreds of gigabytes of DRAM and terabytes of SSD.

[Elroy] The part you're missing is that you assumed for no good reason that the unsp...

Elroy — 8/10/2026 10:05:28 PM

The part you're missing is that you assumed for no good reason that the unspecified interest in that scenario is a low number. It isn't.

Well, we know that it's a zero interest convertible.

If SIMO redeems the notes the cost is.....

The redemption price, in each case, will be equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest

"Special interest" isn't defined anywhere.

So we'll have to wait and see if it gets defined when the deal closes.

[Anonymous895] The part you're missing is that you assumed for no good reason that the unspecif...

Anonymous895 — 8/10/2026 9:02:58 PM

The part you're missing is that you assumed for no good reason that the unspecified interest in that scenario is a low number. It isn't.

[Elroy] Yes, based on what's written in the press release and my understanding thereof, ...

Elroy — 8/10/2026 5:01:41 PM

Yes, based on what's written in the press release and my understanding thereof, I don't know why the lenders would lend. It seems if SIMO's share price does very well and is 130% above the conversion price, after Aug 2029 SIMO can repay the convertible loan for principal and (unspecified) interest, and there is no equity kicker for the lender. Why make that loan?

But I don't see where I'm misreading the press release.

[Anonymous895] I would consider it highly unlikely (read:impossible) that the interest owed if ...

Anonymous895 — 8/10/2026 4:16:59 PM

I would consider it highly unlikely (read:impossible) that the interest owed if they redeem early will be only the equivalent of 6% interest. Not happening. That would be the convertible note holders giving up all their upside in the win scenario. Not happening.

[Elroy] Well, I don't know if this is correct, and we'll see what the analysis says of t...

Elroy — 8/10/2026 3:44:31 PM

Well, I don't know if this is correct, and we'll see what the analysis says of this convertible offering as it appears, but.......

I think the convertible bond holders can convert their holdings after May 2031 and receive principal plus the difference between the conversion price and the SIMO stock price, and SIMO will pay the principal in cash and the difference in cash, SIMO stock or some combination thereof

Also, after May 15th 2029 SIMO has the option to redeem the convertible notes if the SIMO share price is 130% of the conversion price. If this happens, as I understand it there is no dilution, SIMO just has to come up with the $920m principal to repay the debt principal.

So probably SIMO's goal will be to try to get the stock price up to 130% of the conversion price by 2029, and redeem the $920m debt. It's not clear to me if SIMO is able to do this option, what (beyond the principal) the lenders will receive.

Any idea if that understanding is correct? It seems to good to be true.

[Elroy] They are probably looking to build up inventory, but the inventory build is prob...

Elroy — 8/10/2026 12:59:02 PM

They are probably looking to build up inventory, but the inventory build is probably not for their own chips (which shouldn't be so expensive or hard for them to build inventory for) but for the memory they need to include with their SSD Solutions division. Although memory is right now shooting up in price, and their access to memory is part of what's getting them a foot in the door, memory is very price volatile and a very large build-up in expensive inventory can leave them flat-footed and with a very large write-down when the memory cycle turns.

Yup, buying NAND inventory is likely to reason for this offering. And I understand the risks you describe when NAND prices turn down. Hopefully SIMO has some inventory management plan in place, but yeah, it's risky.

However, the implication is that SIMO's $182m cash and $672m inventory is not even close to enough that they require for expected future sales. That's nothing short of awesome.

In Q3 2026 I think SIMO will do $4.00 EPS, and that number will be growing sequentially going forward. But just take that number, x it by four to get annual EPS run rate, and you're at $16.

SIMO is growing annual sales more than 120% per year, EPS faster than that, and trading at less than 15x Q3 2026 EPS annualized. Either the stock price must go up, or the sales growth must slow.

This capital raise indicates the sales growth is not going to slow, and may in fact accelerate.

I can wait for the stock price to respond to actual results being reported. It's going up. I think $500 by 2029 (which hopefully makes the convertible call option nullified) is very reasonable. Frankly I think SIMO should be $500 by December. Just wait for them to report $575m at $3.75 or $600m and $4.00 in Q3 2026, and build inventory bigly, and guide Q4 2026 up strongly, AND have $1 billion cash on the balance sheet.

It's going to the moon.

[Elroy] It's also limited, to some degree, that SIMO has the right to redeem at any time...

Elroy — 8/10/2026 12:53:27 PM

It's also limited, to some degree, that SIMO has the right to redeem at any time that the stock is 30% above the conversion price, so the 10x scenario is not really likely.

It says in this case SIMO has the right to redeem for principal and unpaid or special interest.

Does that mean no dilution?

It's unclear to me what might be unpaid interest since it's zero interest convertible. Are they perhaps calling the gap between the conversion price and the future share price "interest".

And....what's "special interest"? I hope it means there is something in the offering that says if SIMO early calls the convertible, rather than owing a difference between conversion price and stock SIMO would owe principal plus this mysterious as of yet unspecified "special interest".

[Elroy] Having reviewed the press release again, here's my take on the offering. The "c...

Elroy — 8/10/2026 12:48:09 PM

Having reviewed the press release again, here's my take on the offering.

The "conversion price" will be set this afternoon when the deal closes. For discussion, lets says it's $350.

Before May 15 2031 the note holders can only convert their notes under certain condition, which we don't know at this time.

" Prior to the close of business on the business day immediately preceding May 15, 2031, holders of the Notes will have the right to convert their Notes upon the satisfaction of specified conditions and during certain periods."

After May 2031 they can redeem their bonds.

"On or after May 15, 2031....the Notes will be convertible at the option of the holders at any time..."

There is another paragraph that says if SIMO's stock price is 130% of the conversion price (in our example, $455) after Aug 2029, then SIMO can repurchase the bonds for principal + unquanitified "special interest"

"...the Notes will be redeemable, in whole or in part (subject to certain limitations), for cash, at Silicon Motion’s option, on or after August 20, 2029 if the last reported sale price of the ADSs equals or exceeds 130% of the conversion price....The redemption price, in each case, will be equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest"

Ok, I think this means that if SIMO's stock price does really well before Aug 2029 then this convertible offering can be redeemed like a normal bond, and there is no dilution.

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My take - I think SIMO may expect that by 2029 SIMO's stock price is likely to be 30% above the converion price ($350?, so SIMO stock price above $455 by 2029). If so, SIMO can redeem the convertible for $920m principal (assuming the green shoe is exercised) + "Special Interest". Presumably the "special interest" rate will be determined when the offering closes this afternoon. Lets say 6%.

So if SIMO's stock price is above $455 by 2029, the today's convertible offering is the same as a 6% bond (as long as SIMO can generate the cash to repay $920m + special interest).

Right?

[Kirk ©] I haven't looked in detail about this for SIMO but there is something called "To...

Kirk © — 8/10/2026 12:01:01 PM

I haven't looked in detail about this for SIMO but there is something called "Toxic Financing" a VC I worked with long ago taught me to look for. This allows the lender with a convertible to short the stock knowing full well their losses are capped on the upside where they get shares to cover their short plus a return of their cash. If the stock craters, they can cover the short at a much lower price and keep the rest of the cash they got from shorting. Of course the cost to short a stock has a high price that subtracts from there returns, but it is something to consider.

[franklin1] It's hard to understand why they would spend almost $70,0000 usd for an office b...

franklin1 — 8/10/2026 11:53:51 AM

It's hard to understand why they would spend almost $70,0000 usd for an office building and now dilute our shares..

[Anonymous895] I'm also not sure this is as bullish as you think. They are probably looking to ...

Anonymous895 — 8/10/2026 11:16:22 AM

I'm also not sure this is as bullish as you think. They are probably looking to build up inventory, but the inventory build is probably not for their own chips (which shouldn't be so expensive or hard for them to build inventory for) but for the memory they need to include with their SSD Solutions division. Although memory is right now shooting up in price, and their access to memory is part of what's getting them a foot in the door, memory is very price volatile and a very large build-up in expensive inventory can leave them flat-footed and with a very large write-down when the memory cycle turns.

Sure, it doesn't look like the memory cycle is ready to turn down now or next year, but it will eventually turn, and I prefer my companies not to be capital-intensive and potentially left holding the bag.

[Anonymous895] I am being unfair in my last line. It is really much less dilutive than that, be...

Anonymous895 — 8/10/2026 11:13:01 AM

I am being unfair in my last line. It is really much less dilutive than that, because the principal of $800 million is being returned in cash, not shares. But that really just means that how dilutive it is depends on how bullish you are. If you think this will double in five years, then there will only be 1 million shares issued, in addition to the $800 million paid back. If you think it will go up 10x in five years (I'm not saying you should think this), then there will be 2.8 million shares issued.

It's also limited, to some degree, that SIMO has the right to redeem at any time that the stock is 30% above the conversion price, so the 10x scenario is not really likely. They can just sell straight equity at that time and use that to pay back the convertible notes to limit the dilution to no more than maybe 750,000 shares.

[Anonymous895] Basically, in five years (August 15, 2031), Silicon Motion will have to pay back...

Anonymous895 — 8/10/2026 11:02:44 AM

Basically, in five years (August 15, 2031), Silicon Motion will have to pay back the $800 million it is "borrowing" in cash, without interest. If the stock is above X (so far not decided), then the conversion feature of the stock will kick in, which means that Silicon Motion will have to pay back the $800 million in cash, plus the excess of the conversion in either cash (this will act as the interest for the five years of the loan) or stock (which will act as the interest for the five years of the loan, but will be dilutive) or any combination thereof.

X has not yet been decided, but is likely to be somewhere in the range of 30-50% higher than the present stock price (so in the range of $305-$355). So Silicon Motion is kind of selling stock at a higher price than the present stock price, but only kind of, because these convertible note holders have no downside as they are guaranteed to get back at least their $800 million in cash, and will only buy equity if it is advantageous for them.

For example, if X is $325, convertible note holders will only convert if the stock is above $325. If the stock is $326, then they make a grand total of $4 (because they convert into 4 shares), and we essentially borrowed their $800 million interest free. If the stock is $625, then the four shares they are owed are worth $2,500 (for every $1,000 they lent), and they are receiving $1,500 in interest (whether paid in cash or in shares, whichever SIMO wants to do) for five years worth of borrowing, which comes out to an interest rate of 20% a year, compounded. Not a great deal for SIMO. If the stock is trading then for $369, then the stock they are owed is worth $1,476, which comes out to a 7.5% compound interest rate.

So for the chance of getting a very large "interest rate", the convertible note buyers give up a fixed interest rate and may end up getting nothing in interest. This chance is worth more on a very volatile stock, such as SIMO, which is why they are willing to do it.

If the other choice for SIMO is selling stock at the present market price, then this route is definitely better for them and their shareholders. If the other choice is borrowing $800 million at prevalent market rates and you firmly believe that their stock is going to zoom in the future, then this is a bad choice for them and their shareholders. It is, however, a "safer" choice in the sense that there is no obligatory interest payments that can cause a cash crunch if something goes wrong.

If you firmly believe that the stock is for sure going up (which is perhaps something you can't be *too* sure about), then a simple inaccurate rough rule of thumb would be to just look at this transaction as selling stock at the conversion price, so about selling 2.5 million ADS shares for $800 million.

[Elroy] This has got to be for cash for future inventory builds. I think it's great new...

Elroy — 8/10/2026 7:15:27 AM

This has got to be for cash for future inventory builds. I think it's great news.

Does anyone understand the conversion process or how this may dilute shareholders if converted?

---

August 10, 2026 7:01 PM CST

Silicon Motion Technology Corporation Announces Proposed Offering of 0.00% Convertible Senior Notes due 2031

Opportunistic capital raise with proceeds intended to enhance financial flexibility and support growth initiatives

TAIPEI, Taiwan and MILPITAS, Calif., Aug. 10, 2026 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (NasdaqGS: SIMO) (“Silicon Motion”), a global leader in designing and marketing NAND flash controllers for solid-state storage devices (“SSDs”), today announced its intention to offer, subject to market and other conditions, $800,000,000 aggregate principal amount of 0.00% convertible senior notes due 2031 (the “Notes”) in a private offering to persons reasonably believed to be “qualified institutional buyers” pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). Silicon Motion also expects to grant the initial purchasers of the Notes an option to purchase, for settlement within a period of 13 days from, and including, the date the Notes are first issued, up to an additional $120,000,000 aggregate principal amount of Notes.

The Notes will be senior, unsecured obligations of Silicon Motion. The Notes will not bear regular interest, and the principal amount of the Notes will not accrete. The Notes will mature on August 15, 2031, unless earlier repurchased, redeemed or converted. Prior to the close of business on the business day immediately preceding May 15, 2031, holders of the Notes will have the right to convert their Notes upon the satisfaction of specified conditions and during certain periods. On or after May 15, 2031 until the close of business on the second scheduled trading day immediately preceding the maturity date, the Notes will be convertible at the option of the holders at any time regardless of these conditions. Silicon Motion will settle each conversion by paying the principal amount (or, if less, the conversion value) of the Notes in cash, and any conversion value in excess of the principal amount will be settled in cash, American depositary shares of Silicon Motion (the “ADSs”), each representing four ordinary shares of Silicon Motion, par value $0.01 per share, or any combination thereof, at Silicon Motion’s election.

Silicon Motion may redeem the Notes for cash at its option, in whole but not in part, in connection with certain tax-related events. In addition, the Notes will be redeemable, in whole or in part (subject to certain limitations), for cash, at Silicon Motion’s option, on or after August 20, 2029 if the last reported sale price of the ADSs equals or exceeds 130% of the conversion price for a specified period of time and certain other conditions are satisfied. The redemption price, in each case, will be equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid special interest, if any, to, but excluding, the redemption date. Holders of the Notes will have the right to require Silicon Motion to repurchase their Notes upon the occurrence of a fundamental change (as defined in the indenture governing the Notes) or on August 15, 2029, in each case, at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid special interest, if any, to, but excluding, the applicable repurchase date. The initial conversion rate and other terms of the Notes will be determined at the pricing of the offering.

Silicon Motion intends to use the net proceeds from the offering for general corporate purposes and to repay amounts outstanding under its credit agreement. Pending the use of the net proceeds from this offering as described above, Silicon Motion may invest the net proceeds in short-term, investment grade, interest-bearing securities.

[Elroy] I think this company is a SIMO Mon Titan customer Innodisk posts record sec...

Elroy — 8/9/2026 9:09:29 AM

I think this company is a SIMO Mon Titan customer

Innodisk posts record second quarter profit on AI and memory demand

digitimes.com

[Elroy] In the "old" days (i.e. before being acquired by WDC), SNDK talked more about th...

Elroy — 8/7/2026 5:39:38 PM

In the "old" days (i.e. before being acquired by WDC), SNDK talked more about these kinds of things. In those days they used internally-developed controllers for their key products but would sometimes use merchant controllers for lower-volume products. I have no insight into their current controller strategies but would not be surprised if that is how they do it today.

SIMO says that many NAND makers are abandoning consumer device focused internal controllers, and SIMO's business trends prove it. SIMO is growing cell phone controllers sales like crazy, but cell phone units sold are in decline in 2026 compared to last year.

But I don't know which NAND makers are exiting consumer device controllers, and which are remaining in that space. Most likely it's Samsung, SK and MU which are exiting, because part of the reason for their exit from consumer device NAND controllers is those guys are moving all their silicon design talent to HBM (which is 50% customized chips as opposed to plug and play) because it's much more profitable.

I'm sure the NAND makers love selling NAND wafers with 85% gross margins and are happy to have someone else do the lower margin controller and module creation portion of the business. Controllers are not interesting compared to selling wafers at current margins.

perhaps, it is SIMO receiving market share rather than taking it. Still potentially good for SIMO, but not necessarily an indication of relative strength.

Yes, you're right, they're giving away market share to SIMO, they're not losing it to SIMO. But effect is same same. SIMO sales go up.

As for SIMO's strength, the question then becomes when NAND market dynamics change, will the NAND makers try to regain consumer controller market share? I doubt it. Who wants to pursue the low end when there is a monopoly entity sitting there? They all want the high end with high capacity, and are happy someone else will make the low end consumer product stuff. Fortunately, the number of low end devices (cell phones, PCs, game consoles, smart glasses, smart home, tablets, etc etc) is massive. It's high volume low cost, 'lower margin than AI data center' space. NAND makers all want to rule the AI data center, while SIMO will make billions of $2 consumer device NAND controller chips. - a great business for one company, but sorta sucky if there are multiple competitors. I think it may become SIMO's forever......we'll see.

I doubt the NAND makers make consumer device controllers for sale years from now in order to recapture that space. Once it's gone, it's SIMO's cash cow. SIMO will have to watch out for new entrants from below them in the tech chain outta China competing on price, not from NAND makers trying to regain $1 cell phone NAND controller market share.

[Bargain Hunter] A couple of quick reactions to some of your points: Sandisk manages the entire ...

Bargain Hunter — 8/7/2026 4:34:49 PM

A couple of quick reactions to some of your points:

Sandisk manages the entire value chain from the design of the NAND die through front-end wafer manufacturing at some of the largest fab complexes in the world with our JV partner to system-level design including our world-class controllers and final back-end assembly and test, all the way to the hands of our customers.

(Maybe Sandisk is not a major SIMO customer, I don't know, hard to find out which NAND makers are big merchant controller buyers and which are more internal controller development focused)

During the quarter, Datacenter revenue reached $2,977 million, up 103% sequentially. Edge revenue reached $5,432 million, up 48% sequentially. Consumer revenue was $556 million, down 32% quarter-over-quarter.

(Wow. SIMO's consumer revenue was up strongly in Q2 while SNDK went down. SIMO is taking A LOT of market share).

I would suggest that the reduction in consumer revenue is because SNDK is redirecting more of their available bits towards higher-margin products, similar to how the DRAM manufacturers are redirecting more of their bits towards HBM. So, perhaps, it is SIMO receiving market share rather than taking it. Still potentially good for SIMO, but not necessarily an indication of relative strength.

[Elroy] NAND memory maker SNDK reported yesterday - here's some tidbits from their conf...

Elroy — 8/6/2026 8:59:46 AM

NAND memory maker SNDK reported yesterday - here's some tidbits from their conference call that may affect SIMO.

....momentum continuing to build during the quarter.

AI is fundamentally a memory-centric storage-intensive problem. And it is reshaping the demand equation for NAND. The shift to inference in agentic AI is generating data at a scale that is redefining storage requirements. Every AI interaction creates content that must be stored, retrieved and served at low latency. And each of these steps relies on data storage products, including our high-capacity enterprise SSDs.

We scaled our compute focused TLC enterprise SSDs across a broad set of hyperscale and AI infrastructure customers. And this quarter, we began shipping our QLC Stargate platform for revenue, giving us a complete complementary portfolio spanning performance-intensive compute workloads and high-capacity AI data lakes.

(SIMO says their enterprise controller (named Mon Titan) will first be used in TCL SSDs, and later when more supply of 2TB QLC NAND becomes available in QLC SSDs).

Sandisk manages the entire value chain from the design of the NAND die through front-end wafer manufacturing at some of the largest fab complexes in the world with our JV partner to system-level design including our world-class controllers and final back-end assembly and test, all the way to the hands of our customers.

(Maybe Sandisk is not a major SIMO customer, I don't know, hard to find out which NAND makers are big merchant controller buyers and which are more internal controller development focused)

Sequential revenue growth came approximately 1/3 from higher volumes and 2/3 from higher pricing.

During the quarter, Datacenter revenue reached $2,977 million, up 103% sequentially. Edge revenue reached $5,432 million, up 48% sequentially. Consumer revenue was $556 million, down 32% quarter-over-quarter.

(Wow. SIMO's consumer revenue was up strongly in Q2 while SNDK went down. SIMO is taking A LOT of market share).

With that, let's move on to guidance. We expect the NAND market to continue growing at an accelerated pace, supported by AI inference as a tailwind. We estimate the NAND market will exceed $300 billion in revenue in calendar year 2026, up 3x year-over-year. Looking further ahead, we estimate that the NAND market will approach $500 billion in revenue in calendar year 2027. Within this time frame, we expect Datacenter share of total TAM to expand from approximately 30% in calendar year 2025 to approximately 50% in calendar year 2026 and to continue outpacing the market in 2027. Demand from our customers is growing faster than our supply. We, therefore, expect bits to remain on allocation beyond calendar year 2027.

(Damn. Sounds like NAND prices are going up through calendar 2027. I think this sold out thing is good for SIMO because they can get NAND while lots of others cannot)

For the first quarter of fiscal year 2027, we expect revenue between $10.3 billion and $10.8 billion with sequential growth driven by both bit growth and higher pricing.

(Prices going up in Q3).

(They're going to make $45 in Q3, that's a $180 per year run rate. At $1,200 stock price the PE is 6.7x, and they expect the NAND industry to grow 60% next year. It's nuts!).

...inference is a memory bound problem. Storage is extraordinarily important to the equation.

Here we are with a little bit more than 50% of our supply for fiscal year '27, which we're a month in now, is already committed.

(There are some articles that say 2027 NAND supply is already sold out. This quote says SNDK Q3 2026 to Q2 2027 is 50% sold out)

In FY '28, that steps up to 2/3 -- roughly 2/3 of our supply is already committed. We understand what the mix is. We understand what the economics are. So we feel like we've just made incredible progress here on taking a year ago, we were talking about visibility in this business of 3 months. And now we're talking over 4 years of committed financials and understanding the mix and working with, as Luis said, some of the most enviable companies in the world.

(Hmmmm, from Q3 2027 to Q2 2028 SNDK is 2/3rds sold out. Interesting....)

(They say later in the call that these long term agreements have gross margins between 83% and 85%. That's amazing. NAND used to get 20% in bad times and 55% at the peak. Now they're saying theie more than 50% sold out for four years at 84% gross margins. It's like selling software)

I think one of the most interesting dynamics is some of our biggest customers are already coming back and wanting more, right, from just what they thought they needed 3 months ago. It's a very, very robust demand environment, especially in the Datacenter.

(Demand is still growing. Peaking = no)

...it sounds like you guys have significantly improved your visibility. You keep mentioning greater than 4 years. So I'm curious with that and kind of your thoughts on supply growth, when do you see industry supply/demand converging? And kind of how has that view changed relative to 3 months ago?

if you just think 3 quarters ago, 4 quarters ago, this whole market was transacted quarterly. And now we're sitting here saying we have 4-plus years of visibility, and we have customers signing up for 5 years of demand. ...the level of strategic engagement with our customers, it is difficult to comprehend how advanced it is versus where it was 2 or 3 quarters ago.

[Elroy] My pleasure!

Elroy — 7/31/2026 11:09:10 PM

[Jim50] Thanks, Elroy, for your prompt reply. I suppose I should also take this opportu...

Jim50 — 7/31/2026 7:28:37 PM

Thanks, Elroy, for your prompt reply. I suppose I should also take this opportunity to thank you for all the information you have provided on SIMO since I first bought it about 20 years ago. (I've been in and out of it a couple of times since then.) It's long been one of my favorite holdings.

I appreciated the back-and-forth between you and Anonymous today. Much of it was over my head, but both of you certainly have a lot to offer. I'll look forward to more discussions between the two of you.

For what it's worth, I'm an old goat and go way back to the days when Zeev Hed would post, and one of the best threads on here was "Buy When There is Blood in the Streets." Not sure if you recall those days.

Anyway, thanks again, Elroy.

[Elroy] When SIMO announced the new office building (about 2018) they said they would bu...

Elroy — 7/31/2026 5:55:40 PM

When SIMO announced the new office building (about 2018) they said they would build it and then sell it and lease it back.

When the building finally completed there was a new CFO, and as far as I can tell they're keeping the building. There has been no discussion of a sale and leaseback in any conference call or presentation.

As for MXL arbitration, my understanding is the last Singapore Arbitration Court meeting was in March, and a decision is expected by September. Sadly I can't remember where I heard that, so I'm not even sure it's correct. I think it may have been written in an SEC filing for one of the two. Amazingly neither MXL or SIMO got asked about this on their conference calls. Nobody cares about a potential $250m or more settlement.

MXL doesn't even have $150m cash on their balance sheet (frickin' losers).

[Elroy] One, Silicon Motion doesn't always beat their guidance. They usually beat thei...

Elroy — 7/31/2026 5:50:05 PM

One, Silicon Motion doesn't always beat their guidance.

They usually beat their guidance, especially on the way up. They usually beat the high end of their guidance when things are on the way up.

They're definitely going to beat the high end of their guidance in Q3 2026.

Two, worse, they have relatively less visibility more than one quarter out, because their own customers can change their plans and don't really know what the end markets will necessarily absolutely look like so far in advance.

I think they've got better visibility than most. PCs and cell phones will sell every year, with small fluctuations (2026 is very weak compared to last year due to high component costs, but PCs and cell phones will sell year in year out), and SIMO has forward visibility of their design win market share. It's pretty good visibility. As for the new stuff (everything else) it's growing rapidly, so yes they don't havea good idea what Q3 2027 will look like, but it's highly highly likely to be up strongly compared to Q3 2026. Autos, NAND module as boot drives, and enterprise SSDs are all going ganbusters, so their future visibility is really really really really strong growth, or if things slow a bit, just really really really strong growth.

SIMO's main issue with visibility is it's hard to tell how quickly hyper growth segments will grow. Fine. We don't need to know the future quarterly sales numbers for these segments within 5% of what will actually come to pass, we just need to know that all of them doubling is sorta within reasonable view, some will be up 40%, others up 200%, that's fine, even if we don't know where in that range reality will play out.

Three, 50% sales growth for 2027 is far from a certainty.

Yeah, it's not certain. I'm just guessing. It may be 2027 is up 80%. The drags are the classic PC and cell phone and eMMC/gadgets segments, maybe they grow only 10%-25%, and they're large. But the boot drives and autos segments might grow over 100%, and blend it all together to be, who knows, maybe 50%, we'll find out next year.

I just threw out $25 as a reasonable 2027 EPS number, I didn't make a detailed model. I don't know how rapidly they're going to spend on Op Ex, I don't know where the operating margin will go (if it starts the year at 30%, presumably higher) and I don't know how quickly the Mon Titan and boot drive new stuff will sell, so yeah, I don't know.

Finally, in the current hyper growth phase I don't think the EPS is so terribly important for the share price. It's more the sales growth, the rate of growth and sustainability of sales, the re-rating of the stock's valuation as Wall Street accepts that it has changed from a consumer device (cell phone, PC) semi stock to a well diversified semi stock with better visibility, longer life cycles and GROWING product segments (unlike stagnant PC and cell phone segments).

Another mega growth item is the boot drive success indicates SIMO can do very well making drives, so perhaps down the road they do something similar to Phison and made client SSD drives, UFS drives, complete enterprise SSDs and resell the NAND memory as well as the controller, which means the price per unit does a 4x or 5x compared to just selling the controller. Boot drives and autos is already 30% of sales. That's nuts! I think it's because they business is doing fine, but mostly the price of the memory portion of the boot drive has gone up so much and SIMO is recognizing 45%-50% gross profit on buying the NAND from the maker and reselling it in the boot drive to their customer. So rather than sell a $20 controller they're selling a $300 boot drive, or maybe it's a $1,000 boot drive? If that approach (sell the full controller + NAND drive rather than just the controller) works in other areas, the sales growth is off the charts because the drive is so much more expensive than just the controller.

Wishful thinking? What's growing faster than SIMO? SIMO's results deserve more optimism. It should be at investor's 20x 2027 EPS forecast, whatever that forecast is for EPS (you choose), but it's not. That's cool, it will re-rate higher at some point as the sales growth gets reported.

Inventory of $672m exiting Q2 says think wishfully!

[Jim50] Perhaps I've missed it, but has there been any mention of the sale of SIMO's new...

Jim50 — 7/31/2026 5:39:33 PM

Perhaps I've missed it, but has there been any mention of the sale of SIMO's new office building or the outcome of the MXL suit? Thanks!

[Anonymous895] Okay, that's pretty much how the math in my post worked out as well. But I think...

Anonymous895 — 7/31/2026 3:40:53 PM

Okay, that's pretty much how the math in my post worked out as well. But I think you have to recognize that this is not very reasonable, perhaps low numbers, as if they are definitely making this. It has a number of aggressive assumptions. One, Silicon Motion doesn't always beat their guidance. Two, worse, they have relatively less visibility more than one quarter out, because their own customers can change their plans and don't really know what the end markets will necessarily absolutely look like so far in advance. Three, 50% sales growth for 2027 is far from a certainty.

I'm not saying this scenario can't happen. But it's far from certain. And it's not what I would call a "base" case by any means.

For the record, I am highly long Silicon Motion and it makes up a VERY significant portion of my portfolio. I think they are very well positioned. I just want to put some brakes on the wishful thinking.

[Elroy] Please show your work. Well, I haven't done much detailed analysis, just wingi...

Elroy — 7/31/2026 3:27:01 PM

Please show your work.

Well, I haven't done much detailed analysis, just winging it.

However......

In general SIMO beats the high end of it's own sales and earnings forecasts when things are going up. Things are going up STRONGLY at the moment, so I think they definitely beat the high end of their own sales and guidance in Q3 2026.

The midpoints of their sales and operating income guidance produces about $3.35 EPS in Q3. So since beating their sales guidance and probably with gross margins a touch above their guide, they probably do about $4.00 in Q3 2026. That's a $16 per year EPS run rate.

Q4 2026 has less official guidance, but they have said sales will go up from Q3, and the operating margin should be 30% or higher. So we can assume from $4.00 in Q3 2026 EPS is going up in Q4 2026, lets just call it close to $5.00 EPS? Nah, $4.50, I don't want to jump into modeling at the moment, so lets just say they exit 2026 on a $18 per year EPS run rate.

If SIMO grows sales 50% in 2027, earnings is going to grow more than 50% due to sales growing faster than operating expenses, and gross margins going up due to increased sales of Mon Titan and PCIe gen5 PC controllers.

Eye balling it, lets say they do your roughly $2billion sales in 2026, and that goes to $3 billion in 2027 with a (lets call it) 33% operating margin? That's $990 million operating profit, tax it at 20% (22%? this is tax rate is moving around, lets use 20% for easy math) so tax of $200m, that's net income of $790m, divided by 35 million shares outstanding, and you've got $22.60 EPS.
Close enough!

You can bump the 2026 sales growth rate to 60%, or bump the operating margin up to 35%, and it's close enough to $25 EPS.

Keep in mind SIMO had $515m inventory in Q1 and did $430m sales in Q2. Now they've got $673m inventory in Q2 and are guiding Q3 sales to only about $520m. If history is any guide they are going to blow away the Q3 sales number.

Precise modeling in hyper growth stages like now for SIMO is nearly impossible, "it's going up" is a lot easier to argue......

[Anonymous895] The plain English reason is that the income statement is supposed to represent a...

Anonymous895 — 7/31/2026 3:16:42 PM

The plain English reason is that the income statement is supposed to represent all the money made by the company. If an asset of the company has verifiably went up in value (because it is a public stock and simple math), then it is counted as income because their assets have gone up in value. Cash has not been received yet, but that is not essential to the definition of income (no differently than if sales are made, but cash is not yet received, which will show up in the income statement nevertheless). This is different than a building or private investment that we have no way of really knowing its true value until it is sold, in which case it is held on the balance sheet at cost until it is sold and its true value is known. Accountants are at essence bean counters and if there is something that is countable and verifiable, they will want to count it. Which is what is happening here.

[Elroy] I'm wondering why a change in an equity investment appears on an income statemen...

Elroy — 7/31/2026 3:12:32 PM

I'm wondering why a change in an equity investment appears on an income statement. That's all.
It seems to me to be an asset, so it seems like it should appear on a balance sheet and not on an income statement.

It's not a big deal, I'm just curious.

If you know the "plain English" answer, please share. If not, no sweat.

I do sometimes wonder why companies with MASSIVE cash positions don't invest some percentage of that cash into equities rather than treasuries, but this has nothing to do with the SIMO equity unrealized gain on the income statement question.

[Anonymous895] Whoa there, slow down! Please show your work. How do you get to $25 EPS in 2027 ...

Anonymous895 — 7/31/2026 3:12:31 PM

Whoa there, slow down! Please show your work. How do you get to $25 EPS in 2027 at the same time that you are talking about 50% revenue growth in 2027? This past quarter's adjusted earnings was $2.43 per share. Next quarter's revenue is projected to be $80 million higher. Even if we are to assume that 50% of that falls straight to operating income (too high) and then deduct 22% for income tax, we would only reach a Q3 adjusted EPS of $3.34. Let's say that Q4 is just as up q/q over Q3 as Q3 is projected to be over Q2 (an unsafe assumption), that would bring Q4 up to $4.59. That would bring the entirety of 2026 up to $11.94 for the year, with some pretty aggressive assumptions.

With those same aggressive assumptions, revenue for the year of 2026 would be $1.946 billion. If revenue went up a further 50% in 2027 (unknowable at the moment, but certainly possible), following the same aggressive logic of 50% to operating income (still too high) and 22% tax rate, that would add a further $11.11 of adjusted earnings per share, for a total of $23.07.

So even with VERY aggressive assumptions, I'm not reaching $25 a share of earnings for 2027.

I think SIMO is a great stock, highly undervalued, and positioned very well whatever happens with AI in the end. They benefit indirectly from AI causing their competitors to cede to them their core market, which will boost their long-term market share for years to come. They benefit directly from AI with their new divisions. Even if the AI capex boom falters for whatever reason (or if SIlicon Motion is outcompeted in their AI division), the indirect benefits will last.

But I don't think you're doing anyone any favors by throwing out wild numbers and calling them "very reasonable (perhaps low)" when they actually appear to be HIGHLY aggressive and wild-eyed. Perhaps I'm missing how you reach your numbers and I am certainly willing to hear where you think I may be going wrong with my calculations.

[Anonymous895] I'm not trying to be argumentative. At this point, I'm confused as to what you'r...

Anonymous895 — 7/31/2026 2:48:57 PM

I'm not trying to be argumentative. At this point, I'm confused as to what you're unclear on. Yes, an argument can be made that these fluctuations should go straight to equity and bypass the income statement. An alternative argument can be made that any change in equity deserves to show up as income on the income statement. Great, we both can hear both sides.

So what's unclear? Why Silicon Motion chose to do it this way (via the income statement)? That's why I referenced the accounting standards that give them no choice; this is how they have to do the accounting, whether they agree or not, whether they like it or not.

Is the question why the accounting industry standardized on doing it specifically this way? That's what I responded to already as shrug, who cares, that's just the way it is.

[Elroy] Ok, after absorbing the latest SIMO earnings release (Q2 2026) for a few days, l...

Elroy — 7/31/2026 2:23:31 PM

Ok, after absorbing the latest SIMO earnings release (Q2 2026) for a few days, lets see what I can come up with in regard to the stock.
Hmmmm - this is the best stock in all of technology!

Well, it is a pretty amazing story going on at SIMO now. Sales in EVERY segment are growing rapidly. Product segments are expanding beyond the traditional cell phone and PC segments to autos, enterprise hardware and AI data center storage. The Ferri division (where SIMO buys NAND and packages it with one of their controllers, and then sells the module/drive to the customer) doubled from Q1 to Q2, and grew 17x (<-!!!) year over year. It was 30% of sales, and has nothing to do with PCs and cell phones. In a year it seems PCs and cell phones may be less than 50% of sales as SIMO completes it's diversification away from consumer deviced into ...... well, the world everything that needs NAND storage.

SIMO is going to have BOOMING sales for at least the next six quarters, and those sales are going to diversify SIMO's business into more consistent reliable revenue streams with larger barriers to entry, longer life cycles and more predictability. Oh, and higher gross margins.

There's no need to over analyze it. I don't know what SIMO's earnings will be in 2027, but $25 seems very reasonable (perhaps low) so the stock is at about a 11x PE, and growing sales easily more than 50% in 2027 (again, perhaps a lot more than 50%).

Just own it and when things slow down (to 20% annual growth) we can do a more in depth analysis of the outlook then.

SIMO is today doing what stocks with 100x PE's are supposed to do sometime in the future - grow like a weed into more attractive higher profit level revenue streams while also strongly growing the legacy business through market share gains.

I predict SIMO reaches $1,000 before December 2027. Sales are growing to fast for the stock price to remain this low.