Fri Mar 15, 2013 3:26pm EDT

n">(Reuters) - Radio frequency chip makers are set to gain as Samsung Electronics Co Ltd and Apple Inc unveil ever more sophisticated smartphones and tablets to battle for the No. 1 spot in the global mobile devices market.

Investors and analysts say they like shares of RF Micro Devices Inc, Skyworks Solutions Inc and Avago Technologies Ltd - companies that make the chips that enable gadgets to send and receive data wirelessly.

Samsung unveiled its latest flagship phone, the Galaxy S4, in New York on Thursday. The S4 can stop and start videos when someone looks at the screen, flip between songs at the wave of a hand and record sound to accompany pictures.

As manufacturers improve and add new features to phones, which are increasingly used to stream music, video and games, they are boosting the RF chip technology used in the devices.

"The RF content in handsets continues to go up," said Stewart Stecker, a portfolio manager at AlphaOne Capital. "That's good from an immediate to longer-term perspective for the entire RF supply chain."

The importance of RF chips will increase as network operators deploy high-speed wireless technology known as 4G LTE (long-term evolution), analysts said.

LTE requires a much higher number of frequency bands, which increases the number of RF chips in a phone.

The global LTE market is expected to almost double this year, surpassing the $10 billion mark, according to a March 13 report from telecom market research firm Infonetics Research.

"As you add LTE - that's a whole other frequency - you need more radio, more RF equipment," said Northland Securities analyst Tom Sepenzis.

A Verizon customer, for example, using a Samsung Galaxy S4 while traveling the world, would need to be able to use the LTE network in the United States and other countries, said Sepenzis.

"That requires more complex amplifiers that can handle multiple frequencies, requires better antenna solutions, switching capability to handle all the different frequencies. That obviously favors the RF component manufacturers," he said.

DIVERSIFYING ORDERS

Within the RF chip supplier group, analysts said those that have diversified their client base by supplying to Samsung, Apple, and other smartphone vendors such as China's ZTE Corp are best placed to take advantage of demand.

After chipping away for years at Apple's market share, Samsung emerged as the No. 1 seller of smartphones last year, undercutting its main competitor with cheaper handsets and a wide range of products.

Samsung sold 64.5 million smartphones in the fourth quarter of 2012, compared with 43.5 million iPhones sold by Apple, data from market research company Gartner shows.

Greensboro, North Carolina-based RF Micro receives about a quarter of its revenue from Samsung, up from 10 percent a year ago, data compiled by analysts showed. Orders from Apple account for a fifth of sales, they said. RF Micro declined to comment.

Power amplifier maker Skyworks relies on Samsung and Apple for about a quarter each of its revenue, analysts said. Skyworks was not available for comment.

T. Rowe Price Global Technology fund portfolio manager Josh Spencer said he likes Avago Technologies Ltd.

"Avago has some very high-end filtering technology that you have to have in the smartphone antennas," Spencer said, adding that he was also considering buying RF Micro's stock.

Shares of RF Micro and Skyworks gained 15 percent and 21 percent respectively from the beginning of the year until February 21, when the upward trend was interrupted by Qualcomm Inc's unveiling of plans to make its own RF chip.

But both stocks recovered a day later after analysts said it was unlikely that Qualcomm would risk damaging integrated circuit partnerships to seek a profit opportunity of not more than $600 million.

Qualcomm has nearly half of the global market for "baseband" chips, which connect mobile phones to cellular networks, and therefore is also set to benefit from rapid LTE growth.

The S4 will use Samsung's application processor in some regions and Qualcomm's Snapdragon chips, which have LTE features, in others.

"Qualcomm has such dominance in the baseband market that they have pricing leverage even against big customers," Spencer said.

(Editing by Robin Paxton)

View the original article here

n" readability="105">Aug 9 (Reuters) - Early in 2012 President Barack Obama responded to critics of his multi-billion-dollar green technology initiative by saying he was "not going to cede the wind or the solar or the battery industry to China."

Six months later, he faces that very real possibility for the U.S. car battery industry, a once-high flying sector buttressed by generous federal grants, but struggling with a green car market that has fallen far short of expectations.

A123 Systems Inc on Wednesday became the second U.S. government-backed battery maker this year to go overseas for a lifeline - and it turned to China. Auto parts supplier Wanxiang Group will take a controlling interest and invest $450 million in the Massachusetts-based battery maker, which faced running out of cash by the year-end.

Earlier this year, Ener1 Inc, another battery maker that received a government green technology grant, emerged from Chapter 11 bankruptcy under the control of Russian investor Boris Zingarevich. New York-based Ener1 is also a joint-venture partner in China with a Wanxiang subsidiary.

In the past three years, U.S. battery makers, anticipating consumer demand for green cars that never materialized, have over built production capacity, often with government funding.

Electric vehicle and hybrid sales for the first seven months of the year totaled 270,000, representing only 3 percent of total U.S. car sales, according to the green-car website Hybridcars.com.

As part of the 2009 American Recovery and Reinvestment Act 's E lectric Drive Vehicle Battery and Component Manufacturing Initiative, A123 was awarded a grant of $249.1 million. Ener1 subsidiary EnerDel was awarded $118.5 million to manufacture advanced lithium-ion batteries for electric and hybrid vehicles.

A123 promised to create 38,000 U.S. jobs, including 5,900 at its own plants. A123 said on Thursday it has 1,300 workers.

Theodore O'Neill, a former equities analyst with Wunderlich Securities, said A123 "built a factory that's big enough to meet demand that's probably not going to materialize until 2020 ... They built it much larger than the market turned out to need."

FINDING 'PARTNER' FOR U.S. JOBS

That kind of underperformance provides new fodder for Obama's opponents in the Republican Party with just three months until election day.

Obama has spent months battling critics of the administration's green-tech initiative in the wake of the high-profile bankruptcy of solar-panel maker Solyndra.

"It's not going to be a smooth, easy ride ... Some companies will fail," he said in his State of the Union speech in January.

But tempering expectations has done little to quiet the critics in Washington, who ramped up their attacks on Thursday with the added accusation of putting technology in Chinese hands.

"Once again it appears the Department of Energy and the Obama administration have failed to secure sensitive taxpayer-funded intellectual property from being transferred to a foreign adversary, which raises serious national security issues," said Rep. Cliff Stearns. Stearns is a Florida Republican and chairman of the House Energy and Commerce Committee's Subcommittee on Oversight and Investigations.

A123 spokesman Dan Borgasano said on Thursday that, with Wanxiang's bid to take control of the battery company, "our intention is to continue to build in the United States and reach certain job levels. We think we found a partner to help us do that ... I don't think we'll necessarily be making hard and fast job projections."

After it received the DOE grant, Ener 1 said in early 2010 that it planned to create 1,400 jobs at its Indianapolis battery plant. Today, the plant employs around 250. The plant was designed to produce battery packs for up to 600,000 hybrid vehicles.

The companies' struggles with over capacity are typical of an industry whose fortunes are tied directly to those of electric and hybrid vehicle manufacturers.

"There was a bit of a rush to put in capacity that really wasn't justified by the events as they turned out," said Tom Gage, president of EV Grid, an infrastructure company based in Palo Alto, California. "In retrospect (the industry) was over-optimistic in terms of projecting the rate of growth for demand for car batteries."

Charles Ebinger, head of the energy security initiative at the Brookings Institution, said controversies surrounding government-backed companies such as A123 will make lawmakers hesitant to support expanded funding of clean energy, especially with federal budget battles looming.

"I think it's going to slow down," Ebinger said. "It's going to be increasingly difficult to argue for subsidies for any sector."

View the original article here

Thu Aug 9, 2012 7:49pm EDT

n">Aug 9 (Reuters) - Early in 2012 President Barack Obama responded to critics of his multi-billion-dollar green technology initiative by saying he was "not going to cede the wind or the solar or the battery industry to China."

Six months later, he faces that very real possibility for the U.S. car battery industry, a once-high flying sector buttressed by generous federal grants, but struggling with a green car market that has fallen far short of expectations.

A123 Systems Inc on Wednesday became the second U.S. government-backed battery maker this year to go overseas for a lifeline - and it turned to China. Auto parts supplier Wanxiang Group will take a controlling interest and invest $450 million in the Massachusetts-based battery maker, which faced running out of cash by the year-end.

Earlier this year, Ener1 Inc, another battery maker that received a government green technology grant, emerged from Chapter 11 bankruptcy under the control of Russian investor Boris Zingarevich. New York-based Ener1 is also a joint-venture partner in China with a Wanxiang subsidiary.

In the past three years, U.S. battery makers, anticipating consumer demand for green cars that never materialized, have over built production capacity, often with government funding.

Electric vehicle and hybrid sales for the first seven months of the year totaled 270,000, representing only 3 percent of total U.S. car sales, according to the green-car website Hybridcars.com.

As part of the 2009 American Recovery and Reinvestment Act 's E lectric Drive Vehicle Battery and Component Manufacturing Initiative, A123 was awarded a grant of $249.1 million. Ener1 subsidiary EnerDel was awarded $118.5 million to manufacture advanced lithium-ion batteries for electric and hybrid vehicles.

A123 promised to create 38,000 U.S. jobs, including 5,900 at its own plants. A123 said on Thursday it has 1,300 workers.

Theodore O'Neill, a former equities analyst with Wunderlich Securities, said A123 "built a factory that's big enough to meet demand that's probably not going to materialize until 2020 ... They built it much larger than the market turned out to need."

FINDING 'PARTNER' FOR U.S. JOBS

That kind of underperformance provides new fodder for Obama's opponents in the Republican Party with just three months until election day.

Obama has spent months battling critics of the administration's green-tech initiative in the wake of the high-profile bankruptcy of solar-panel maker Solyndra.

"It's not going to be a smooth, easy ride ... Some companies will fail," he said in his State of the Union speech in January.

But tempering expectations has done little to quiet the critics in Washington, who ramped up their attacks on Thursday with the added accusation of putting technology in Chinese hands.

"Once again it appears the Department of Energy and the Obama administration have failed to secure sensitive taxpayer-funded intellectual property from being transferred to a foreign adversary, which raises serious national security issues," said Rep. Cliff Stearns. Stearns is a Florida Republican and chairman of the House Energy and Commerce Committee's Subcommittee on Oversight and Investigations.

A123 spokesman Dan Borgasano said on Thursday that, with Wanxiang's bid to take control of the battery company, "our intention is to continue to build in the United States and reach certain job levels. We think we found a partner to help us do that ... I don't think we'll necessarily be making hard and fast job projections."

After it received the DOE grant, Ener 1 said in early 2010 that it planned to create 1,400 jobs at its Indianapolis battery plant. Today, the plant employs around 250. The plant was designed to produce battery packs for up to 600,000 hybrid vehicles.

The companies' struggles with over capacity are typical of an industry whose fortunes are tied directly to those of electric and hybrid vehicle manufacturers.

"There was a bit of a rush to put in capacity that really wasn't justified by the events as they turned out," said Tom Gage, president of EV Grid, an infrastructure company based in Palo Alto, California. "In retrospect (the industry) was over-optimistic in terms of projecting the rate of growth for demand for car batteries."

Charles Ebinger, head of the energy security initiative at the Brookings Institution, said controversies surrounding government-backed companies such as A123 will make lawmakers hesitant to support expanded funding of clean energy, especially with federal budget battles looming.

"I think it's going to slow down," Ebinger said. "It's going to be increasingly difficult to argue for subsidies for any sector."

View the original article here

1 of 2. A customer walks past a glass case displaying Maotai liquors with different price tags at a supermarket in Shenyang, Liaoning province August 8, 2012.

HONG KONG/SHANGHAI | Thu Aug 9, 2012 10:59pm EDT

HONG KONG/SHANGHAI (Reuters) - The makers of China's fiery liquor baijiu, a pricey, potent drink that is a staple at state dinners, say it inspires poets and can even ward off dementia.

For investors in the largest baijiu makers Kweichow Moutai Co Ltd and Wuliangye Yibin Co Ltd, the appeal is more mundane: the companies paid out huge dividends and raised earnings forecasts when a slowing economy had prompted dozens of Chinese firms to issue profit warnings.

Demand for high-grade liquor at state banquets and premium pricing helped Moutai post an operating profit margin last year that was more than double that of tech giant Apple Inc, the world's most valuable company, Thomson Reuters data shows.

Moutai is even a partner of the Chinese Olympic Committee, pushing out a commemorative brew for the London 2012 games.

But the stellar first-half results that these companies are expected to report this month may mark the high point if Beijing cracks down on lavish baijiu-drenched banquets.

Moutai posted a 43 percent increase in first half net profit late on Thursday, yet its shares fell almost 4 percent on Friday as the growth fell short of what some analysts had predicted. Wuliangye is expected to announce its interim results after markets close on August 19.

Premier Wen Jiabao pledged in March to ban the use of public funds for luxury items including baijiu, which retails for about $300 per standard bottle and well into the thousands for rare, aged varieties.

"It really depends on how strongly the government would like to execute this policy," said Melinda Zhang, a manager in the consumer and retail practice at the consultancy Booz & Co, who has studied the baijiu sector.

"In the long term, we see the China baijiu market keeping stable growth," she added. "The demand is there. Consumption behavior of businesses and the government will not have significant change."

DRYING UP

At the five-star Okura Garden Hotel in Shanghai, a top banquet venue, the beverage manager, surnamed Liao, said baijiu sales had dropped more than 20 percent since March.

In Tianjin, a bustling port city near the capital Beijing, Moutai sales were down by as much as 50 percent over the past half year, the official China Daily reported in late July.

Some localities have introduced their own rules, like prohibitions on drinking at lunch, to improve the image of government officials. In Jiangsu province's Siyang county, public expenditures on receptions had been cut by two-thirds, the Shanghai-based Oriental Morning Post reported.

The clamp-down on government profligacy, a hot-button issue in China where ordinary people sometimes associate officialdom with boozy banquets and corruption, comes ahead of the sensitive once-in-a-decade political transition later this year.

Yet fund managers and sell-side analysts have remained almost uniform in their bullishness on Moutai and Wuliangye, in part premised on the companies' ambitious earnings guidance. Wuliangye is predicting a 51 percent jump in first-half profit.

Of the 22 analysts tracking Wuliangye, 21 rate it a 'strong buy' or 'buy,' according to Thomson Reuters StarMine. For Moutai, 17 of 18 have a 'buy' or 'strong buy' rating.

While onshore Chinese stock markets fell 33 percent over 2010 and 2011, Moutai was a standout outperformer, surging 25 percent. Wuliangye rose a more modest 3.6 percent.

In 2012, Shanghai-listed Moutai is up 35 percent, while Shenzhen-listed Wuliangye is up 14.2 percent. This compares with a 2.8 percent gain in the CSI300 Index of the top Shanghai and Shenzhen listings.

"In the awful (stock) market conditions of the last two-and-a-half years, the outperformance of baijiu stocks has got to do with their earnings visibility," said Cao Xuefeng, head of research at Huaxi Securities in Chengdu. "Growth for the sector will stay high, but rates of growth will slow down."

Moutai and Wuliangye currently trade at 16.6 and 13.2 times their respective forward 12-month earnings, at the low end among shares of companies classified as "consumer staples" in China.

Wuliangye did not respond to repeated interview requests and Moutai declined to comment for this story.

BRIDGE TO THE WORLD

Baijiu, which translates to "white spirits," traces its roots back centuries and is made from a mixture of grains including rice, wheat and corn. It packs a punch similar to vodka, with an alcohol content typically above 50 percent, and is normally downed fast and neat in tiny shots.

On their websites, Moutai and Wuliangye both boast of their firms' long histories. Moutai also claims health benefits, saying moderate drinking "keeps the dementia away" and even helped a 92-year-old man re-grow his teeth.

But it is demand from the Communist Party that drives sales.

"As liquor for state banquet, Wuliangye has become an envoy and bridge between China and the outside," Wuliangye said on its website, adding that "many famous scholars, poets (and) generals in history have got addicted to the marvelous flavor."

That bridge to the outside has reached investors including BlackRock Asset Management, which is listed among the top 10 shareholders in both Wuliangye and Moutai.

But the alcohol itself has found few foreign fans. Some 98 percent of Wuliangye's 20.35 billion yuan ($3.19 billion) in revenue last year was domestic. For Moutai, 97 percent of its 18.4 billion yuan in revenue last year came from within China.

"There is almost no export market. 'Laowais' (foreigners) don't drink that thing," said Hong Hao, chief equity strategist at Bank of Communications International Securities.

Indeed, some foreigners have likened drinking baijiu to swallowing razor blades or jet fuel. That suggests China will struggle to follow the lead of Japan, which succeeded in making sake a popular global drink.

British drinks company Diageo Plc is trying. Last year, Diageo bought a majority stake in Sichuan Swellfun Co Ltd, maker of Shui Jing Fang baijiu, a deal that the company said would "enable us to bring one of the leading Chinese white spirits brands to international markets."

So far, those international markets are limited to places such as San Francisco and London, where wealthy Chinese tourists snap up baijiu because it is cheaper overseas and buyers believe they run less of a risk of picking up a counterfeit bottle.

Paul Mathew, a British bar owner and drink consultant living in Beijing, said he did some baijiu experimenting for Diageo. One example was the Shui Jing Fang Grapefruit Sour, which mixes a shot of baijiu with pink grapefruit juice, lemon juice, cinnamon syrup and an egg white.

Derek Sandhaus, an American living in Chengdu, Sichuan, who chronicled his conversion from baijiu hater to enthusiast in a blog entitled "300 Shots at Greatness," said he developed a taste for the liquor after 75 attempts. The title of his blog, however, refers to one study that estimated it takes 300 shots to start to enjoy the stuff.

"There's definitely a cultural barrier in terms of cocktails," Sandhaus said.

HOME SHOPPING NETWORK

That leaves domestic consumption as the main driver.

But as demand slows, supply is building. Credit Suisse analysts said inventory growth hit a record high of 35 percent in 2011, outpacing sales growth.

"It doesn't matter if you have superior pricing power like Moutai does right now. That will disappear when there's oversupply," BoComm International's Hong told Reuters.

With an operating margin of 67 percent last year -- triple the industry median according to Thomson Reuters data -- Moutai can afford to lose a little pricing power. Wuliangye's margin was a relatively modest 42 percent, still double the industry median.

"In terms of margins, Kweichow Moutai has the advantage because most of what they produce is higher-quality liquor," said Yi Yangfang, a fund manager at Guangzhou-based GF Fund Management, which manages $7.9 billion worth of assets that includes stakes in both Kweichow Moutai and Wuliangye.

Some long-time China watchers said the government's crackdown on lavish banquets may not last long.

Paul French, a veteran Shanghai-based market consultant with the firm Mintel, said campaigns like the one launched by Wen, who is due to retire early next year, have tended to be cyclical and easy to circumvent.

"Every time they try to do anything like this people find a way around it... If you sit around long enough you'll come up against that story again in a few years," he said.

(Editing by Emily Kaiser and Ryan Woo)

View the original article here