Improving chip sales signals tech recovery
02 Jan 2024
AmBank Research remains upbeat on the technology sector as it believes the semiconductor industry is on a recovery path.
Citing Semiconductor Industry Association (SIA), the brokerage said global semiconductor sales have been improving since March 2023, signalling a gradual recovery within the industry.
“International Data Corp (IDC) forecasts global semiconductor revenue to grow by 20.2% to US$633bil in 2024, driven by improvement in average selling prices and demand for dynamic random-access memory (DRAM) chips and content such as artificial intelligence (AI),” it said.
AmBank Research, which maintained its “overweight” stance on the tech sector, believes the sector has bottomed and demand is expected to recover.
The research house said continuous technological advancements in new products within the automotive and consumer electronics sectors, showcasing cutting-edge chips, novel features and advanced equipment tools, would bolster the sector.
Moreover, it emphasised the positive impact of trade diversion through the “China plus one” strategy, which is proving advantageous for local players as multinational corporations redirect their production hubs towards Malaysia and Vietnam.
AmBank Research added that chip fabrication expansions are currently being supported by rising demand for leading-edge and mature process nodes.
Citing US-based Semiconductor Equipment Manufacturers Industry (SEMI), the research house said the semiconductor market’s revenue would grow at a seven-year compounded annual growth rate of 10% to US$1 trillion by 2030.
“According to SEMI, semiconductor manufacturers worldwide are forecasting new fab expansions in 2022-2026, with higher spending on 200mm front-end equipment, especially in China,” it added.
Additionally, AmBank Research anticipates the demand for new smartphones from American and Chinese brands, which led to bumper earnings in the third quarter of 2023 (3Q23), will continue into 4Q23 and 1Q24.
“Outsourced semiconductor assembly and test players will continue experiencing improving plant utilisation rates and production yields resulting from the onboarding of new products in the second half of 2024 (2H24),” it noted.
The research house expects a sectoral revenue growth of between 15% and 24% in 2024, supported by higher volume loading on new projects as existing and new customers ride on the demand recovery of consumer electronic products.
As for consumer electronics, Ambank Research expects the segment to remain soft in 1H24 due to weak consumer sentiment and an ongoing inventory destocking cycle.
However, it anticipates an improvement in 2H24, supported by the launch of next-generation smartphones and the hardware refresh cycle.
AmBank Research noted some short-term challenges in the automotive sector due to falling demand for electric vehicles (EVs), influenced by high costs and reduced subsidies.
Despite a projected modest growth in 2024, long-term prospects remain positive, driven by EV adoption and the industry’s shift towards carbon neutrality.
AmBank Research believes growth in other industries will help cushion the slowdown in key segments.
“Some players like Pentamaster Corp Bhd are involved in the medical technology (medtech) segment, which is growing from a low base,” it said.
The research firm said companies are seeing substantial growth in the medtech segment due to an increase in demand for automated processing lines and assembly systems for various medical devices and medical products.
Source: The Star
