Near-term downside risk seen for chip industry


  • Technology
  • Thursday, 05 Dec 2019

TA Securities, in the report yesterday, maintained its “neutral” stance on the semiconductor sector with a “buy” recommendations on Unisem, “hold” on Inari Amertron and Malaysian Pacific Industries and a “sell” on Elsoft Research. (Filepic shows a UNISEM factory.)

PETALING JAYA: While global semiconductor sales are predicted to resume growth next year, TA Securities Research warns of a downside risk in the near-term.

The research house said it sees a near-term downside risk for the sector if the US proceeds to impose tariffs on the remaining imports from China, with the next wave of tariffs covering major consumer items like laptops, smartphones, and television sets.

Global semiconductor sales in October 2019 came in at US$36.6bil, rising 2.9% month-on-month (m-o-m), and declining 13.1% year-on-year.

The research house noted that growth on a m-o-m basis marked the fourth consecutive month of sequential growth, while on a y-o-y basis represented further moderation.

Cumulatively, it said numbers were down 13.9% year-to-date to US$338.8bil due to weakness across most major product categories, against the backdrop of the trade war as well as weaker memory demand and pricing.

US-based Semiconductor Industry Association (SIA), meanwhile, forecasts global semiconductor sales in 2019 to fall 12.8% (previously 13.3%) before resuming growth in 2020 and 2021 at 5.9% (previously 4.8%) and 6.3% respectively.

SIA represents US leadership in semiconductor manufacturing, design, and research, with members accounting for about 95% of US semiconductor sales.

“While the global semiconductor market has slumped somewhat in 2019 compared to the record sales posted in 2018, the recent trend is more positive, with month-to-month sales increasing in October for the fourth consecutive month, ” SIA president and CEO John Neuffer said in a statement.

“Global sales are projected to decrease by double digits in 2019, then rebound with moderate growth expected in 2020 and 2021, ” he said.

TA Securities, in the report yesterday, maintained its “neutral” stance on the semiconductor sector with a “buy” recommendations on Unisem, “hold” on Inari Amertron and Malaysian Pacific Industries and a “sell” on ELSOFT RESEARCH.

“We like Unisem as we expect the complete closure of its loss-making operations in Batam Island, Indonesia to offload the long-standing drag on its earnings, ” it said.

It said the key downside risks for the sector include a prolonged and heightened trade war as well as a weakening of the US dollar.


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