Global chip demand remains high

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PETALING JAYA: The impact of the current movement control order (MCO) on the production of the local technology sector will depend on the duration of the lockdown, say analysts.

The MCO, which has been extended to June 28 from June 12, saw the electrical and electronics sector operating at 60% workforce capacity.

Apart from the current MCO, other near-term uncertainties for the sector include higher raw material costs due to the global semiconductor shortage, higher overall costs related to Covid-19 restrictions such as logistics, distribution and sanitation as well as travel restrictions impacting discussions with potential customers.

AmInvestment Bank Research in its latest report said: “We believe that the multi-year growth riding on positive prospects for the sector has been fairly priced in.”

The positive prospects from the increasing demand for semiconductors, include the adoption of 5G smartphones and increased investment in expanding 5G infrastructure globally, electric vehicles and autonomous driving with more interest in new technologies and the adoption of Industry 4.0 technologies.

The World Semiconductor Trade Statistics has projected a 19.7% growth for global semiconductor sector estimated at US$527bil (RM2.19 trillion) in 2021 followed by an 8.8% growth at US$573bil (RM2.38 trillion) in 2022.

Asia-Pacific, including China, is forecast to show the strongest growth rate at 23.5% this year, followed by Europe, Japan and the Americas.

The Semiconductor Industry Association recorded US$41.9bil (RM173.9bil) sales in April this year – up 2% month-on-month and rose 22% year-on-year – as global demand remained high and sales rose across a range of chip products throughout the world’s major regional markets.

Meanwhile, AmInvest Research has “buy” calls on Inari Amertron Bhd and Globetronics Technology Bhd with a fair value (FV) of RM3.31 and RM2.84 respectively.

This is followed by “hold” calls on Malaysia Pacific Industries Bhd (FV RM36.05) and Pentamaster Corp Bhd (FV RM4.99).

The research house, which currently has a “neutral” call on the sector, however, may upgrade it to “overweight”.

This is provided if the companies under its coverage secure significant jobs and/or major customers, the strengthening US dollar, faster-than-expected adoption of technological trends such as 5G, spurring high demand for end products and improvement in the US-China trade relationship.

The research house noted that “all the companies under our coverage are expanding their capacity to cater for demand upsurge following the global chip shortage”.It pointed out that Inari would continue its capacity expansion for its radio frequency business in line with the growing demand for 5G while Globetronics is expanding its factory space in Penang by 30%.MPI, which is undergoing the second phase of its level two expansion at Carsem Suzhou, is also seeking a new site in China by end-2022 for its silicon carbide related-products while adding a 121,000 sq ft building near its M-Site in Ipoh, Perak.Pentamaster is also setting aside RM25mil to expand the production space of its factories in Batu Kawan and Bayan Lepas this year and is on the lookout for a third plant in Batu Kawan for its factory automated solution.

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