Global semiconductor industry sales increased +7.3% year on year to USD49 billion in July 2022, up from USD45.7 billion in the previous year. Sales increased in most regions, with America leading the way with +20.9%yoy growth, while China fell marginally by -1.8%yoy. Meanwhile, monthly sales in July 2022 were -2.3%mom lower than in June 2022, totaling USD50.2b. Month-to-month sales climbed in Europe and Japan but fell in the Americas, China, and the Asia Pacific.
With rising concern about climate change, the market for electric vehicles (EV) is expanding at a strong clip. According to EV-Volumes statistics, 778,092 new passenger plug-in EVs were registered in July 2022, a +61%yoy increase. More than 4.9 million new passenger plug-in EVs have been registered globally so far this year, compared to 6.5 million in the whole calendar year of 2021. EVs already account for roughly 12% of global automobile production and are projected to expand as policymakers begin to focus on sustainable energy alternatives. As part of efforts to clean up road transport, legislators in the European Parliament agreed earlier this year to mandate that all new car and van sales should be zero-emission by 2035.
California has followed the lead of the EU by implementing new restrictions prohibiting the sale of new gasoline-powered vehicles and trucks for the next 13 years, a step aimed at tackling climate change that might hasten the country’s transition to EVs. As EVs have become a more recent compelling element driving the expanding demand for smart LEDs in automotive, we believe the spread of this technology will drive the margin expansion and quick growth of our local player, DOGT, in the next years.
In reflection on this trend, the performance of technology companies under MIDF’s coverage was mixed, with three companies registering earnings within expectations namely; D&O Green Technologies Berhad, Unisem (M) Sdn Bhd, and Datasonic Group Berhad, and three came in below namely; Inari Amerton Berhad, Globetronics Technology Berhad and MY E.G. Services Berhad. The lackluster performance was ascribed to a challenging economic climate for technology companies, including rising inflation, Federal Reserve rate hikes, global supply chain issues, changes in purchasing patterns due to the COVID-19 pandemic, and geopolitical turmoil in Russia and Ukraine.
Nonetheless, given that 5G is expected to generate multi-year growth, similar to the 3G to 4G transition cycle, MIDF believes that the tech businesses will continue to be the primary beneficiaries of 5G technology.
As such the investment house picks DOGT (BUY, TP: RM4.58), one of the top 5 LED producers globally as the company is
ideally positioned to benefit from the EV market’s accelerating expansion. Due to its great product innovation, large client
base, and increased LED consumption per car.
Inari (BUY, TP: RM3.53) because the Group’s future as Malaysia’s largest outsourced semiconductor assembly and test (OSAT) provider remains intact. Despite the lower projection on revenue from the smartphone segment in FY23, the management expects it will rebound again, supported by content value growth and new design wins such as RF double-sided moulding system-in-package (SIP) programme in next-generation smartphone models. Coupled with Apple’s strategy to maintain the price for their latest iPhone 14 at USD799, the same amount that it initially charged for last year’s iPhone 13.
Overall MIDF maintains a positive stance on the technology sector despite it continuing to be weighed down by rate rise pressures and other macroeconomic difficulties, but the demand for EV, AI, and 5G-related products remain intact and are critical enablers to ignite the digital economy worldwide.
