Outlook remains bullish for chip sector


TA Securities Research has “buy” calls on all companies under its semiconductor universe including Inari Amertron Bhd, Unisem (M) Bhd, Malaysian Pacific Industries Bhd (MPI) and Elsoft Research Bhd. The target prices for Inari, Unisem, MPI and Elsoft are RM4.25, RM11.80, RM60.85 and RM1.25 respectively.

PETALING JAYA: The strong showing of the semiconductor sector is unlikely to stop anytime soon as chip demand remains robust and global digitalisation efforts accelerate further.

TA Securities Research, which remains bullish on the sector, said the demand for chips will continue to grow amid the Covid-19 pandemic and the proliferation of emerging technologies like 5G, artificial intelligence, cloud computing, Internet of Things and robotics.

The view from the research house comes as global semiconductor sales mark 18 consecutive months of year-on-year (y-o-y) growth as of July 2021.

Global semiconductor sales trended higher in July 2021 as it grew 2.1% month-on-month (m-o-m) and 29% y-o-y to US$45.4bil (RM188.32bil).

According to the Semiconductor Industry Association, sustained robust growth in July was underpinned by all major regional markets and semiconductor product categories as production and shipments reached new highs in recent months to cater to continued strong demand.

On a year-to-date basis, sales are up 24.7% y-o-y to US$302bil (RM1.25 trillion).

In a note issued yesterday, TA Securities Research pointed out that 2021 global semiconductor sales are well on track to climb towards the World Semiconductor Trade Statistics’s forecast to reach a record high of US$527.2bil (RM2.19 trillion).

The research house has “buy” calls on all companies under its semiconductor universe including Inari Amertron Bhd, Unisem (M) Bhd, Malaysian Pacific Industries Bhd (MPI) and Elsoft Research Bhd.

The target prices for Inari, Unisem, MPI and Elsoft are RM4.25, RM11.80, RM60.85 and RM1.25 respectively.

Unisem factoryUnisem factory

“We continue to favour outsourced assembly and test providers, namely Inari, Unisem and MPI, for their strong sales pipeline and earnings growth prospects backed by their expansion plans.

“As for automated test equipment (ATE) provider Elsoft, we like the group for its improving order book, driven by the growing acceptance of its newer series of ATEs, particularly its flagship testers for lighting in smart devices and automotive,” it said.

Despite the positive outlook for the semiconductor sector, TA Securities said a prolonged Covid-19 pandemic weighing on economic growth and sentiment would be a key downside risk for growth.

Other downside risks for the sector would include a heightened trade war, weaker-than-expected sales and a weakening of the US dollar against the ringgit.

Looking ahead, TA Securities said the robust billings growth of the global semiconductor sector as of July underlines the industry’s endeavours to address the prevailing global chip shortage sparked by the acceleration in digitalisation.

MPI Malaysian Pacifi Industry productsMPI Malaysian Pacifi Industry products

In July 2021, the global semiconductor sector’s billings hit another record high for the seventh consecutive month.

Billings in the month rose by 4.5% m-o-m and 49.8% y-o-y to US$3.86bil (RM16.01bil).

Year-to-date, billings are higher 46.1% y-o-y to US$24.02bil (RM99.63bil).

At the current rate, TA Securities said the billings are on course to reach a new record in 2021.

“Meanwhile, equipment spending is expected to remain strong in the coming years, fuelled by the slew of upcoming fabrication capacity to cater to the strong demand for chips anticipated from emerging applications like 5G to 6G communications, artificial intelligence, autonomous vehicles and high performance computing.

“This is in addition to efforts by major economies like China to pursue chip self sufficiency,” it added.

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