Semiconductor sector sees 12th consecutive sales contraction
Posted on August 8, 2012, Wednesday
KUCHING: Global sales of semiconductor contracted by two per cent year-on-year (y-o-y) in June 2012, a 12th consecutive contraction for the industry since July 2011.
“The decline in global chip sales for the six months of 2012 has moderated to minus 5.2 per cent from 5.9 per cent a month ago.
“This has led us to believe that the industry is on the verge of returning to the positive growth territory,” said TA Securities Holdings Bhd (TA Securities) in its research report.
The research house noted further that the sales were little changed at US$24.4 billion on a month-on-month (m-o-m) basis.
The research house observed that regionally, Japan and Asia Pacific regions registered a y-o-y increase in sales of 3.8 per cent and one per cent respectively in June.
This was noted to have partly mitigated the 12.1 per cent contraction in Europe and 8.1 per cent contraction in the Americas.
“News reports suggested that the demand for smartphones typically in China has boosted IC chip consumptions.
“This has helped to offset the sluggish demand in the consumer PC market due to poor economic conditions,” TA Securities explained.
It believed that some purchase decisions had also been held back pending the upcoming launch of the new Windows 8 operating system.
TA Securities expected third quarter sales to be stronger as shipment and orders for Christmas delivery picked up momentum.
The demands for smartphones and tablets were expected to rise with the launch of new products such as the Windows 8 operating system and Windows Surface.
“Hence the demand for IC chips is expected to rise,” the research house predicted.
For companies such as Unisem Bhd (Unisem) and Malaysian Pacific Industries Bhd (MPI), TA Securities expected the companies’ earnings to mirror the industry growth trend to come in strongly in the second half of 2012.
It projected MPI and Unisem’s combined revenue to recover and registered a flat growth of 0.1 per cent.
“However, earnings are expected to grow at a faster pace due to low base effect an the substantial decline in operating costs,” it added, noting that its sales growth assumptions were premised on the scenario that the eurozone debt criss could be contained in the near term.
TA Securities pegged Unisem as its top pick within the sector with a target price of RM3.90 per share based on an up cycle PE of 16 times for the semiconductor industry in anticipation of strong sales moving forward.