AFTER a disappointing performance last year, the domestic semiconductor industry is betting on a strong recovery by year's end in the light of a rebounding tech-dominated Nasdaq market in the United States.
Analysts said the recovery could begin in the second half of the year despite visibility in the near term being cloudy by global economic uncertainties and the Severe Acute Respiratory Syndrome (SARS) problem.
With geopolitical risks receding, global economies and semiconductor demand should begin to grow, provided SARS is contained.
Analysts said global semiconductor sales rose 2.4% month-on-month in March, reversing a three-month decline. On a year-on-year basis, growth picked up marginally to 12.1% from 11.8%. The sequential strength is not unexpected due to seasonal sales.
Even the US-based Semiconductor Industry Association (SIA) expects second-quarter sales to rise between 3.5% and 5.5% quarter-on-quarter, expecting SARS to have little or no impact on the sector.
It had earlier revised projected global semiconductor sales growth this year to a moderate 10% to 15%, down from 19%. Last year semiconductor sales fell 8.4%.
Going forward, analysts said, growth of the industry would likely be driven by retail purchases of personal computers (PCs), anticipated corporate PC upcycle later this year, and a strong local wireless sector.
OSK Research analyst Shin Kao Jack expects industry growth to be at the lower range of a double-digit growth. Although the semiconductor industry has reached a level where new orders have to be placed, the SIA growth projection is far too bullish, he said.
Shin also said the Asia-Pacific region would continue to be the world's largest semiconductor market with a 36% share. Strong consumer spending on cellular phones, DVD players, video game consoles and digital cameras would help to drive chip sales, he said.
Shin also believed the wireless sector would remain the largest chips market as Asia shifts from the 2G to the 2.5G or 3G technology platform. Furthermore, the region would also continue to benefit from outsourcing contracts from global telecommunications giants.
According to Shin, Malaysia's packaging, assembling and testing (PAT) industry should be eagerly awaiting the year-end surge in growth of the semiconductor industry.
Shin said MPI and Unisem derive more than 50% of their revenues from the US market. He also noted that US-based Analog Devices Inc had begun transferring its packaging volume over to MPI since March.
We also believe the proposed internal rationalisation exercise involving Carsem (M) Sdn Bhd and Carsem Semiconductor Sdn Bhd will benefit MPI in terms of efficiency and effectiveness in the long run, he said.
MPI has a 70% stake each in Carsem and Carsem Semiconductor, which are involved in similar businesses of manufacturing and testing semiconductor devices.
Globetronics, however, has a major concern in the delay in its expansion to China due to SARS. One analyst at a bank-backed research house said a delayed start-up would shift revenue contribution to a later date.
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