Optimistic outlook for semiconductor makers

The strong demand across major regions and product categories has pushed the global sales of chips higher by 18% year-on-year to US$51.8bil (RM229.4bil) in May, according to the Semiconductor Industry Association.The strong demand across major regions and product categories has pushed the global sales of chips higher by 18% year-on-year to US$51.8bil (RM229.4bil) in May, according to the Semiconductor Industry Association.

PETALING JAYA: Malaysian tech firms are expected to benefit from the sustained growth in demand for semiconductor chips from automotive and consumer electronics industries.

According to the World Semiconductor Trade Statistics (WSTS), global semiconductor sales are expected to grow by 16.3% year-on-year (y-o-y) to US$646.5bil (RM2.86 trillion) this year.

Based on the optimistic outlook, TA Research has maintained its “overweight” call on the semiconductor sector with a preference for outsourced semiconductor assembly and test providers.

The research house said these include Inari Amertron Bhd, Unisem (M) Bhd and Malaysian Pacific Industries Bhd (MPI) for their robust sales pipeline, earnings growth prospects, strong balance sheets and expansion plans.

Inari Amertron nInari Amertron n

“Beyond near-term headwinds from geopolitical tensions and supply chain disruptions, we expect them to benefit from the structural growth in chip demand.

“This is fuelled by the multitude of secular trends including 5G, artificial intelligence, cloud computing, the Internet of Things, robotics and vehicle electrification,” it said in a report yesterday.

TA Research has a target price (TP) of RM3.30 on Inari, RM3.50 on Unisem and RM38.60 on MPI.

It also upgraded Elsoft Research Bhd to “buy” with a TP of 70.5 sen, given the improved risk reward potential following the stock’s recent share price weakness.

New semiconductor industry sales data reveals no let-up in demand in the near term, despite the many global economic headwinds.

Global chip sales in the month of May rose 1.8% month-on-month (m-o-m) and 18% year-on-year (y-o-y) to US$51.8bil (RM228.4bil), WSTS said in a recent report.

The May numbers means it was the 28th consecutive month of growth for the industry as year-to-date sales amounted to US252.7bil (RM1.12 trillion), up 19% y-o-y.

Companies are making fresh investments to meet demand with global fab equipment spending for front-end facilities in 2022 revised to grow by 20% y-o-y to US$109bil (RM482.6bil) from US$107bil (RM473.8bil), TA Research said.

MIDF Research also remains positive on the tech sector and has Inari as its top sector pick, with the company set to benefit from the launch of Apple’s new smartphone this September.

“Inari’s radio frequency business segment will continue to see robust growth in tandem to the increasing demand for telecommunications products.

“Currently, the group’s utilisation rate is at about 75% and is expected to increase gradually to 90%, approaching the launch date” MIDF said in a report.

It expects D&O Green Technologies Bhd (TP RM4.48) to benefit from demand generated by the strong growth of electric vehicles (EVs).

Global EV sales stood at US$163bil (RM721.7bil) in 2020 and are expected to hit US$823.75bil (RM3.65 trillion) by 2030.

As at May 2022, the global EV sales were up by 55% y-o-y, accounting for 12% global market share.

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