As computers and other electronic devices get more complex and capable, there's an increased need for coordination of the many chips that run those products. That's where SiTime comes in. Surging demand for its timing chips has been the driver of SiTime stock.
Timing chips act as the conductor to an orchestra of specialty chips in a system. It tells chips when to play and not to play, so to speak.
"Timing is the heartbeat of all electronics," SiTime Chief Executive Rajesh Vashist told Investor's Business Daily. It is playing a critical role in AI data centers, automated driving, communications, aerospace and defense, and other areas that demand precision timing, he said.
Santa Clara, Calif.-based SiTime is the leader in precision timing in large part because that's all it does, Vashist said.
"We have 450 people in the company worldwide in 11 locations that are focused exclusively on this one thing," he said. "And that is better oscillators, better clocks, better resonators, and better software for the customers, all around timing. For everybody else that is large, this is a 1% or 2% part of their business."
Timing components are an $11 billion annual industry, but SiTime only focuses on about $3 billion of that opportunity, or roughly 30% of the market. It serves the high-end, mission-critical segments of the market.
SiTime Is Focused On Tough Timing Problems
"We're deliberately choosing to address this unique, high-growth, high-performance, low-latency, hard-to-do timing market. And we're the experts in it," Vashist said. "We've shipped more than 3.5 billion units. We have over 15,000 customers and over 400 different customer applications."
Precision timing has become more critical as chips and sensors face harsher environmental conditions, he said. They have to withstand issues related to temperature and power as well as shock and vibration.
"SiTime wants to become the go-to company for people who have these tough timing problems," Vashist said. "We're not in the business of easy-to-solve problems. We're not in the business of commodity products."
SiTime Stock Flirted With A Breakout
Year to date, SiTime stock is up more than 9%. But in the last 12 months, it is up about 80%.
In late August, SiTime stock flirted with a buy point of 243.35 out of a cup base, according to IBD MarketSurge charts. On Friday, it closed at 234.77.
On Aug. 6, SiTime topped analyst estimates with its second-quarter results. The company earned an adjusted 47 cents a share, up 292% year over year, on sales of $69.5 million, up 58%. Analysts polled by FactSet had expected earnings of 28 cents a share on sales of $64.7 million.
For the current quarter, Wall Street expects SiTime to earn an adjusted 71 cents a share, up 78%, on sales of $78.1 million, up 35%.
Riding The 'Nvidia Gravy Train'
In the June quarter, AI data center computer makers were SiTime's main growth driver. Those systems need timing chips across multiple systems and racks to manage graphics processing units, central processing units, switches, network interface controller (NIC) cards, optical modules, and active electrical cables.
"They've obviously ridden that Nvidia gravy train recently," Bob O'Donnell, chief analyst with TECHnalysis Research, told IBD.
And with numerous timing chips in complex systems, SiTime has expanded into software for even more accurate synchronization. Its software suite enables higher system performance and utilization in AI data centers.
Interesting Ingredient Technology
Another fast-growing market is autonomous driving. Self-driving cars, robo-taxis and other autonomous vehicles need semiconductor timing devices to coordinate the onboard computer with various camera systems and sensors including radar and lidar. Plus, there are chips for navigation and communications to consider.
Outside of AI data centers and autonomous vehicles, SiTime chips can be found in smartphones, earbuds and more.
SiTime is an example of a company that's finding "riches in the niches."
"Timing chips are one of those really interesting ingredient pieces that people don't think about but are critical," O'Donnell said.
Advanced computing systems need a master clock, he said.
"It's the analogy of the conductor and the orchestra. You've got to have the conductor running the orchestra, and if they're not all playing in time it's a problem," O'Donnell said.
SiTime Stock On Tech Leaders List
SiTime is a fabless chipmaker. Its semiconductor MEMS (micro-electro-mechanical systems) are produced by contract manufacturers Bosch, Taiwan Semiconductor and UMC.
Other semiconductor companies that make timing chips as a sideline business include Analog Devices, Microchip Technology, Renesas, Skyworks Solutions and Texas Instruments.
Raymond James analyst Melissa Fairbanks rates SiTime stock as outperform with a price target of 270.
"The market for what we call 'mission critical' applications — such as within the data center and ADAS (advanced driver-assistance systems) — is growing rapidly, with SiTime uniquely able to address higher-performance data rates and increasingly challenging environments," she said in an Aug. 29 client note.
SiTime also will benefit from its business with Apple, she said. It is providing timing chips for Apple's internally developed modem, Fairbanks said.
SiTime stock is on the IBD Tech Leaders list.
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