Providing Semiconductor Business Insights
About Us
Zuo Consulting LLC is an independent business consulting company specializing in semiconductor industry. It is established to help business owners and executives, especially those at Fabless, IDM, or System companies, to make informed decisions by providing clients market insights and expert analysis, including wafer fabrication cost estimation and reduction, market and competitive intelligence, capital investment strategy and evaluation, and M&A valuation.
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Founder of the company, Greg has more than 20 years of working experience in semiconductor industry, built up from engineering to Finance then to Business Strategy, through various engineering/management roles at Lucent, IBM, and TSMC. Greg has obtained two Masters degrees in engineering fields, from USTB and Lehigh University respectively, and then a MBA degree from Stern Business School at NYU.
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Our Mission
To provide semiconductor market insights and trusted services to help clients make informed decisions.
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Our Vision
To become a recognized business partner in the semiconductor industry.
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Our Values
Relentless Learning
Extensive knowledge and expertise in semiconductor field are one of our core competencies. We maintain and develop our competencies through relentless learning. Stay diligent, avoid complacency.
Creative and Strategic Thinking
Being able to think strategically and creatively is another core competency. We can better understand the world by thinking from different perspectives and embracing new ideas. Be open-minded, avoid rigid thinking.
Passion for Excellence
Client Trust
We are passionate about making positive impacts and generating values to our clients. We give our best to serve every client' needs. Deliver highest quality, avoid mediocity.
Client trust is the foundation of our existence. We strive to build a trusted long-term relationship with every client. Be reliable, be candid.
Our Services
We are committed to provide insights and reduce the unknown for business owners and executives, especially those at Fabless, IDMs, or system companies, so that they are in a better position to make critical decisions to grow their business, either organically or inorganically.
For clients' organic growth, we provide wafer fabrication cost estimations and cost reduction strategy, market and competitive intelligence, and capital investment strategy and evaluation; for clients' inorganic growth/M&A, we provide valuation service. Contact us for your needs.
8" and 12" wafer fabrication cost estimations and cost reduction, for different technology nodes.
Target market landscape and dynamics, competitive analysis, pricing, risk and opportunity analysis
Business assumption validation, evaluation of risks, return analysis, return maximization strategy
Unbiased and independent valuation, acquisition analysis, synergy analysis, valuation modeling
US-China Trade Update
Since it started in 2018, US-China trade war has been going on for over 6 years, across two US administrations. With 2024 presidential election fast approaching, it may be helpful to look into the trade data in order to find out the actual impacts of US-China trade war, and to picture what may happen under the next US administration.
Key Findings:
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1. US-China trade war, along with other factors, such as COVID, has caused significant impacts to US imports from China, and less impacts to US Exports to China.
2. During the Trump administration, US imports from China declined from $558 billion in 2018 to $449 billion in 2020, down 20%.
3. During the first two years of Biden administration, US imports from China increased to record high, $564 billion in 2022, then declined to $448 billion in 2023, down 21%, which is a record decline rate in history.
4. China’s share of US total imports declined almost continuously, from 18% in 2018 to 12% in 2023. It further declined to 11% in the first 2 quarters of 2024. China’s share decline mainly occurred in capital goods and consumer goods except foods and automotive. US imports from other countries, especially other Asia countries, Mexico, and Canada, have increased significantly since the trade war.
5. US overall trade deficit had reached record high in 2022, about US$1 trillion. It came down to $785 billion in 2023.
6. US trade deficit with China declined from $378 billion in 2018 to $252 billion in 2023. China’s share of US trade deficit declined from 65% in 2018 to 32% in 2023.
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​10/2024​
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FED Monetary Policy and Balance Sheet Update
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With US being the largest economy and US dollar the main currency in the world, US Fed monetary policy and its balance sheet are of immense importance to the world economy. Directly or indirectly, the changes of Fed monetary policy and balance sheet may impact every business’s balance sheet and normal people’s daily life. It is crucial to understand those changes.
Fed balance sheet has experienced vast changes in the recent decades. Since 2008/11 till 2022/3, to counter the damages caused by 2008 financial crisis and COIVD-19, Fed had conducted 4 rounds of QEs, in order to stabilize the financial systems and stimulate the economic growth. During this QE period, Fed purchased vast amount of Treasury securities and MBS. As a result, Fed total asset jumped from less than $1 trillion to over $9 trillion, increasing $8 trillion, 8 times of pre-QE level. Among this $8 trillion increase, Reserve balance increased about $4 trillion. In early 2022, the federal funds rate target range was 0 to 1/4 percent.
Since 2022/3, Fed decided to raise the target range for the federal funds rate, aiming to bring inflation back to its 2 percent objective in the long run. From 2022/3 to 2023/7, Fed raised the FFR target range 11 times, making it 5-1/4 to 5-1/2 percent. This target range was maintained unchanged for the following year. During this period, Feb balance sheet was shrinking gradually.
On 9/18/2024, Fed decided to decrease FFR target range by 1/2 percent. On 11/7/2024, Fed decided to decrease another 1/4 percent, less aggressive than the last time.
In the meantime, Fed balance sheet continues to shrink gradually in the recent months, despite the decrease in FFR target range. As of the week ended 11/6/2024, total asset is $7 trillion, about $2 trillion less than the peak level after QE4, due to Fed reducing the holding of US Treasury securities and MBS. On the liability side, reserve balance decreased about half trillion; reverse repurchase agreement decreased about $1.5 trillion. The currency in circulation is higher than before. Looking ahead, Fed may make further reduction in the FFR target range. The currency in circulation will likely continue to increase.
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11/2024
WFE Vendors' Tougher Challenges Ahead
On December 2, 2024, US BIS announced another package of rules designed to further impair China's capability to produce advanced-node semiconductors that can be used in the next generation of advanced weapon systems and in AI and advanced computing, which have significant military applications.
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This is the third time that BIS released updated rules on this subject, since it published an interim final rule (IFR) to restrict China’s ability to both purchase and manufacture certain high-end semiconductors critical for military applications in October 2022. The prior two updates were released in October 2023 and April 2024. Two rule updates in 2024 emphasizes BIS's determination to strengthen the export controls and close any loopholes. How these latest updates will impact the WFE vendors exactly is to be seen. Nevertheless, they will face tougher challenges to grow their business in China in 2025 and beyond.
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Currently, Top 4 WFE companies all have big shares of revenue coming from China--in 2023, Applied materials 27%, ASML 26%, Lam 34%, and TEL 44%. 2024 may see less impacts, but 2025 will likely be quite different, especially consider the revenue pull-ins from China in the recent years.
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12/2024
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Taiwan Stock Market Capitalization: 2024 Result and 2025 Outlook
Despite of the complex global economic and geopolitical environments, Taiwan stock market capitalization enjoyed the strongest growth in recent years, reaching NT$74.7 trillion in 2024, up 31% YoY, higher than 28% in 2023. Two consecutive strong growths in 2023 and 2024 came after a decline of 21% in 2022.
The drivers behind the comparable strong growths in 2023 and 2024 are different. While the growth in 2023 could be contributed to the increases in two areas -- one is the foreign portfolio investment, the other ETF, the growth in 2024 was mainly driven by the increase in ETF alone. Unlike in 2023, the foreign investors on TWSE had a net-sell of NT$584 billion in 2024. Luckily, this decline in foreign investment was more than offset by the stunning growth in ETF, which increased over NT$2 trillion in 2024.
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This difference in growth drivers does not mean that the foreign investment does not matter to TWSE. In fact, the truth is the quite opposite. Foreign investors hold over 44% of Taiwan stock market capital in 2024. Changes in foreign investment will directly impact the total market. We can see the impact clearly by zooming into the monthly TWSE market capitalization dynamics. TWSE market cap declined in 3 months in 2024 – April, July, and November. During those months, foreign investment in TWSE also declined.
Synchronized with the monthly movement of TWSE market capitalization, cumulative net inward-remittance from offshore foreign investors also declined in April, July, and November. Overall, it increased US$37 billion in 2024, reaching US$283 billion in total.
Looking forward, will TWSE market cap continue to grow in 2025? The answer to this question will depend on two factors – 1. whether ETF will continue to grow strongly, 2. how the foreign investors will behave. Considering the stunning increases in ETF during 2023 and 2024, it will be difficult to have similar growth in ETF in 2025. If so, how the foreign investors behave will be extremely crucial to TWSE. Will they pull out some capital and flow it elsewhere?
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1/2025
Gold Prices: Now, and Then
Gold price reached all time high on 2/23/2025, over US$2940 per ounce. This is stunning, considering that the gold price was once US$35 per ounce for a long time, until 1971 when Bretton Woods system collapsed after Nixon ended the US dollar’s convertibility to gold.
Since then, the gold price in US$ started its long journey of rising. This rising can be roughly divided into 4 major rising periods, 1973-1980, 2000-2011, 2016-2020, and the most recent, 2022 to now 2025. Among which, the recent price rise is the most rapid and significant, price going up from US$1695 per oz to US$2940 per oz in short 2 years and 4 months.
Following each rising period is the period of price decline and stabilization. The longest price decline and stabilization period is from 1980 till 2000. Overall, the price rising period is longer and stronger than the price decline and stabling period. As a result, the gold price in US$ went up 84 times in the past 54 years.
The gold prices in other major currencies in the world, such as EURO, CNY, JPY, GBP, RUB, follow the similar pattern as in the US dollar, with some, such as EURO, CNY, fitting more closely than others, JPY and RUB. This may show that other currencies are somewhat fixed to the US dollar at adjustable exchange rates. The gold prices in other currencies could be the derivatives from the gold price in US dollar.
What is driving the gold price to skyrocket? The simple answer is the supply and demand on gold, or in contrast, the supply and demand on US$. When people need more gold than the dollar, the gold price will go up. When the dollar supply is more than the gold, the gold price will go up. Ultimately, the confidence on the dollar may be presented in the gold price.
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After 2 years of rapid rising in gold price, the period of price decline and stabilization may come next, sooner or later. Will that mark the end of the journey of gold price rising? Probably not.
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2/2025
Financial Performance of Synopsys and Cadence
As Top 2 leading companies in the EDA market, Synopsys and Cadence both have obtained strong growth in the past few years. Synopsis revenue has grown from US$4.2B/2020 to $6.1B/2024, with CAGR 13.6%. Considering Synopsys divested its entire Software Integrity segment in 2022, the adjusted CAGR for its continuing business is 16.5%. Cadence revenue from US$2.7B/2020 to $4.6B/2024, CAGR 14.7%.
Synopsys gross margin has improved from 78%/2020 to 80%/2024. Its OP margin also has improved from 17%/2020 to 22%/2024, driven by the % reduction in general and administrative expenses. Its R&D expenses have been maintained at around 34% and 35%. Its net margin is up from 17%/2020 to 23%/2024.
In contrast, Cadence gross margin has declined from 89%/2020 to 86%/2024. However, its OP margin has improved from 24%/2020 to 29%/2024, driven by the % reduction in both R&D and General & administrative. R&D expenses reduced from 39%/2020 to 33%/2024. Net margin is slightly up, from 22%/2020 to 23%/2024.
Synopsys net cash provided by operating activities has grown from US$991 million/2020 to US$1407 million/2024, up 42%. Cadence net cash provided by operating activities is up from US$904 million/2020 to US$1260 million/2024, up 39%.
Synopsys total asset has grown from US$8B/2020 to US$13B/2024, total debt up from US$3.1B to US$4B. Its debt asset ratio has declined from 39%/2020 to 31%/2024. Cadence total asset has grown from US$4B/2020 to US$9B/2024, total debt up from US$1.5B to US$4.3B/2024. In 2024, Cadence increased its long-term debt from US$300 million to US$2.5B. Its debt asset ratio is up from 37%/2020 to 48%/2024. Cadence carries higher degree of leverage than Synopsys.
Synopsys current ratio has increased from 1.29/2020 to 2.44/2024. Cadence current ratio also increased from 1.86/2020 to 2.93/2024. However, the drivers for the increase are different for each company. Candence used long term debt to increase its cash; Synopsys divested its software integrity segment to increase the cash.
Both companies have significant sales from China market, their second largest region after US. Synopsys’ China sales increased from US$420 million/2020 to US$990 million/2024, market shares over its total sales up from 11%/2020 to 16%/2024. Cadence’s China sales increased from US$407 million/2020 to US$573 million/2024, market shares over its total sales declined from 15%/2020 to 12%/2024.
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4/2025
EMS Market Update
Despite of the economic disruption caused by a series of unprecedent events since 2020, including COVID lockdowns, US-China trade war, and Russia-Ukraine war, Electronics Manufacturing Services (EMS) industry, the largest subsectors within global manufacturing, has grown strongly in the past 5 years, in term of total market size. EMS market size was around US$ 450 billion in 2020. By 2024, EMS market has reached over US$540 billion, up 20% from 2020.
The sales quantity of each key electronics, however, has not grown. In fact, global smartphone sales declined 2%, from 1.26 billion units in 2020 to 1.24 billion units in 2024. Global PC unit sales declined 6%, from 275 million units in 2020 to 258 million units in 2024. Global tablet sales declined 11%, from 159 million units in 2020 to 141 million units in 2024. Sever sales also declined 6%, from 12.8 million in 2020 to 12 million in 2024.
With quantity decline, the revenue growth was driven by higher average unit price, as a result of higher adoption of 5G, AI, and EV technology. 5G smartphone penetration rate has reached over 66% in 2024. AI technology adoption has been proliferating from smartphone to server market. AI servers have been driving rapid growth in recent years. EV sales have grown from 3 million units in 2020 to over 17 million in 2024.
EMS Companies that have caught 5G, AI and EV growth momentum have enjoyed strong growth in the past few years. Foxconn, the largest EMS company in the world which has over 40% of total market share, has enjoyed 28% sales growth from 2020 to 2024, mainly driven by its growth in AI server and networking sales. Similarly, Quanta sales are up 29%, and Wistron up 24%. On the other hand, Pegatron sales declined 20%, due to its lack of AI and EV growth momentum, and declining sales in traditional 3C. The strong growth in Foxconn, Quanta, and Wistron has all come from US region, overriding their sales decline in China region.
Since 2020, leading EMS companies have reduced their manufacturing dependence in China region, diversifying manufacturing to other regions, such as India, Mexico, and Vietnam. They have pursued this diversification in two ways -- one is to add the new manufacturing assets in other regions, without reducing the existing manufacturing assets in China; the other way is to remove the existing assets in China to other regions.
Foxconn’s non-current assets have increased about NT$200 billion from 2020 to 2024, the majority of this increase occurred in India, Vietnam, Mexico, and US. Even though its non-current asset in China also increased, its China asset ratio has declined from 65% in 2020 to 49% in 2024. In contrast, Pegatron has reduced its non-current asset in China significantly, from NT$61 billion in 2020 to NT$17 billion in 2024. Its China asset ratio dropped from 66% in 2020 to 17% in 2024.
Productivity has also improved significantly at the leading EMS companies during the past few years. While Foxconn’s revenue has grown 28%, from NT$5.4 trillion to NT$6.9 trillion, its total number of employees has declined 28%, from 878429 in 2020 to 633167 in 2024. Similarly, while Quanta’s revenue has grown 29%, its employee number has declined 27%. This productivity improvement is driven by the continuous adoption of automation in manufacturing.
Moving into 2025, leading EMS companies continue to show strong growth in the first half of 2025. Especially, Quanta grew 74%, Wilstron up 87%, Foxconn up 20%, vs the first half of 2024.
Looking forward, 5G, AI, and EV will continue to drive the revenue growth in EMS industry. Diversification and automation will continue to be the key operation strategy for EMS companies. Those who can catch the growth momentum and execute the strategy well will continue to thrive. Those who can not will struggle, and may eventually be washed away by the waves.
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9/2025