We Decrease Nordic's Fair Value to NOK 127; High Inventory Levels Drag on Revenue and Margins

Nordic Semiconductor designs Bluetooth Low Energy chips, the main source of its narrow-moat and with 40% market share. During the past decade we believe Nordic Semiconductor has made a handful of good decisions. The first was to bet early in the BLE market around 2009, which is the standard for short-range communications in battery-powered devices thanks to good data throughput and easy installation. Second, Nordic switched from selling application-specific integrated circuit chips, or ASICs, where each chip is designed for a specific customer and application, to selling application-specific standard products, or ASSPs, which can be used by a wide range of customers and applications. These two decisions have caused Nordic’s revenue to multiply by 5 times since 2014. We also support Nordic’s decision to use distributors as its main sales channel, whereas larger competitors like Qualcomm or Broadcom are less interested given distributors only represent 25% of global chip sales and serve many small and midsize customers.