Smaller foundries may not see much benefit from the expanding metaverse, Morningstar says.
While the growth of the metaverse is expected to benefit semiconductor companies, a recent report suggests that potential payoff will not be evenly distributed.
Researchers at Morningstar said they agreed there is a strong investment thesis in chipmakers, but added that the “potential benefit to foundries is at best uneven.”
The metaverse is an alternate digital reality that has been receiving a great deal of attention. Humans will interact through three-dimensional avatars that can be controlled via virtual reality headsets.
Through the metaverse, users can engage in virtual activities such as gaming, virtual concerts or live sports.
The concept got a huge jolt when social media giant Facebook changed its name to Meta Platforms (FB) – Get Meta Platforms Inc. Class A Report.
On Thursday, Bernstein analysts shared their views of the metaverse, saying that Microsoft (MSFT) – Get Microsoft Corporation Report, Adobe (ADBE) – Get Adobe Inc. Report and Salesforce.com (CRM) – Get salesforce.com, inc. Report are poised to take advantage of the new frontier.
Microsoft is “best positioned to be a big winner from the metaverse, … having almost all of the major capabilities required to deliver a metaverse platform today,” Bernstein analyst Mark Moerdler wrote.
The Morningstar report said that many of the tasks that take place in the metaverse involve real-time processing of immense amount of data.
This will require the chips involved to use advanced process nodes that are only available at Taiwan Semiconductor (TSMC) , Samsung and Intel (INTC) – Get Intel Corporation Report.
Doutful People Are Willing To Spend Hundreds of thousands on AR/VR
Smaller foundries like United Microelectronics (UMC) – Get United Microelectronics Corp. Report, SMIC and GlobalFoundries (GFS) – Get GlobalFoundries Inc. Report may benefit only slightly in low-value parts like power management and display drivers, Morningstar said.
TSMC, the world’s biggest contract chipmaker, said Thursday that it is doubling its forecast for revenue growth amid what it calls a “multi-year industry megatrend” for global semiconductor demand.
Morningstar noted that Nvidia’s (NVDA) – Get NVIDIA Corporation Report recently announced hardware is built on 7nm and later processes to render realistic graphics in virtual settings.
Behind the graphics, the report said, there is massive data that incorporates physical properties of different materials.
“We believe the expansion of non-cutting-edge capacity will benefit minimally from the development of the metaverse,” Morningstar said.
Morningstar said it is doubtful whether people are willing to spend hundreds or thousands of dollars on AR/VR devices at home, and whether the prices of VR/AR headsets will be fast enough to match “metaverse” upgrades.
“It is easier to segment smartphones into different price points, because one user’s experience will not affect another’s,” the report said. “But this may not be the case in the metaverse. How would the metaverse prove its worth if users visualize the same object differently, like a more detailed piece of artwork in higher resolution?
If the metaverse has to cater to the lowest common denominator, Morningstar said, “then upgrades and new applications will be slowed to unacceptable speeds.”
