PETALING JAYA: Global semiconductor market growth is expected to accelerate in 2021, driven by hastened technological progress that had been brought upon by the Covid-19 pandemic.
Despite initial supply chain disruptions amid Covid-19 lockdowns and travel restrictions, AmInvestment Bank Research said the sector has rebounded to a new high.
“The pandemic has hastened the progress of technological change towards remote work and distance learning, the need for Industry 4.0 technologies such as big data, automation and Internet of Things to build a more resilient supply chain, ” it said in a recent report.
The research house added that the pandemic would drive the adoption of 5G and investments in expanding 5G networks globally, as well as electric vehicles with more interest on new technologies.
TA Securities in a recent report said it was reiterating its “overweight” stance on the semiconductor sector, with maintained recommendations of “buy” on Inari Amertron Bhd, Unisem (M) Bhd, Malaysian Pacific Industries Bhd (MPI) and Elsoft Research Bhd.
“Within our semiconductor universe, we continue to favour outsourced semiconductor assembly and test providers including Inari, Unisem (pic above) and MPI for their robust earnings growth prospects, which we expect to be underpinned by their strong pipeline on the back of secular trends like 5G as well as a continued global economic recovery.
“Key risks include a prolonged Covid-19 pandemic weighing on economic growth and sentiment, a prolonged and heightened trade war and foreign exchange fluctuations.”
In a recent statement, JF Technology Bhd managing director Datuk Foong Wei Kuong said he was upbeat on the outlook of the global semiconductor industry.
“The imminent deployment of the game-changing 5G globally will create a paradigm shift through the developments of artificial intelligence, autonomous driving and healthcare advancement, among others, which will lead to a huge wave of demand for the next generation of semiconductors.
“This is also a great opportunity for JF Tech and Malaysia to move up the semiconductor value chain and, in turn, create high-value jobs for Malaysians, ” he said.
When the pandemic hit Malaysia early this year, AmInvestment Bank Research said this only resulted in a push back in orders rather than cancellations.
“The enforcement of lockdowns and travel restrictions locally had caused deferments in orders by a couple quarters rather than order cancellations in most of the companies under our coverage, with order pipelines remaining strong and intact.”
According to the Semiconductor Industry Association (SIA), global semiconductor sales are projected to increase 5.1% in 2020 to US$433.1bil (RM1.76 trillion) from US$412.3bil (RM1.67 trillion) in 2019, followed by an increase of 8.4% in 2021.
“Global semiconductor sales in October increased year-to-year by the largest percentage since March, continuing to demonstrate the global semiconductor market’s resilience so far to headwinds caused by the pandemic and other macroeconomic factors, ” SIA president and chief executive officer John Neuffer in a statement.
“Annual semiconductor sales are projected to increase moderately in 2020, with somewhat larger growth forecast for 2021.”
Regionally, SIA said sales increased on a year-on-year basis in the Americas (14.2%), China (6.3%) and Asia-Pacific (5.3%), but decreased in Japan (-1%) and Europe (-4.8%).
“On a month-on-month basis, sales increased across all regions: Europe (6%), the Americas (3.2%), China (2.9%), Asia-Pacific (2.8%) and Japan (1.6%), ” said the association.
AmInvestment Bank Research said US-China tech relations could see less uncertainties, thus resulting in an easing of tensions under US president Joe Biden’s administration.
“However, we note that Biden will be inheriting regulatory processes that had been initiated by former President Trump and so, policy adjustments might be in order. We also note that the US-China tech decoupling is not necessarily negative as some companies benefit from positioning themselves in both US and China markets.”
The research house said global information technology (IT) spending is expected to grow 4% in 2021.
“In October, research and advisory firm Gartner forecast global IT spending to increase by 4% to US$3.8 trillion (RM15 trillion) in 2021, with the strongest rebound expected from enterprise software (7% year-on-year) to support remote working, to deliver virtual services such as distance learning and telehealth and leveraging hyper automation to meet pandemic-driven demands.
“Data centres will experience the second highest growth (5% year-on-year) due to increased dependence on cloud services from businesses.”
AmInvestment Bank Research added that global auto sales recovery in 2021 would be pinned on China.
“Forecasts for all regions were more pessimistic except for China, which saw signs of improvement in the second quarter of 2020.
“S&P Global Rating forecast 2022 total sales to still be below 2019 volumes, but China has the potential to resume moderate long-term growth and may be the only market likely to recover to 2019 volumes by end-2022, ” it said.
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