Global semiconductor industry sales ticked up +0.1%yoy to USD47.4b in August 2022 from USD47.3b in the previous year. Regionally, month-to-month sales grew in Europe but fell in Japan, the Americas, Asia-Pacific/All Other and China. Meanwhile, yearly sales in Europe, the Americas and Japan climbed, while sales in Asia-Pacific/All Other and China fell.
Nancy Pelosi’s visit to Taiwan in early August prompted China to respond by launching series of military drills surrounding the island. If the tension escalates, it will create a significant threat to the semiconductor industry given Taiwan Semiconductor Manufacturing Company prominence as the world’s top foundry, with more than half of the global chip manufacturing market share. This will jeopardise the semiconductor supply chain. Malaysian semiconductor companies are in a position to benefit from supply chain disruption that arises from this conflict as Multinational Corporations may shift its operations out of the tense countries.
The US is anticipated to announce a new measure restricting Chinese firms’ access to high-performance computing technologies. The CHIPS legislation was launched in July 2022, primarily to enhance local semiconductor research and manufacture in the United States. The new restrictions, however, may be the most far-reaching move taken by the Biden administration to prevent China from gaining access to American technology that drives data centres and supercomputers. The new rules aim to restrict China’s access to sophisticated semiconductor technology, as the US intends to restrict the sale of US-made microchips to Chinese AI and supercomputing firms. The measures to be announced will include formalising technical constraints for producing 14-nanometer or better semiconductors (more advanced chips).
However, MIDF believes that this will have little impact on Malaysian semiconductors. Although the technology industry is still under pressure from rate hikes and other macroeconomic challenges, the reswarch house remains POSITIVE on the sector since the demand for 5G, AI, and EV-related products and services remain strong, and these are the essential enablers to ignite the digital economy globally.
The semiconductor industry is significantly reliant on developing technologies for computational power. As a result, MIDF maintained its positive stance on this sector due to its sturdy mid-long term outlook in combination with the expanding acceptance and integration of smart technologies, which encompass a wide range of industries and applications.
Top picks for the technology sector is Inari Amerton Berhad (BUY, TP: RM 3.53) given the Group’s future as Malaysia’s largest outsourced semiconductor assembly and test (OSAT) remains intact. Also like 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
