KUCHING: The global semiconductor sector, having seen three consecutive months of positive growth as of January 2013 is on track to mild recovery although global economic risks still threaten to cause a downturn in sales.
On a global scale, semiconductor sales showed positive growth numbers in January, ticking up by an encouraging four per cent year on year (y-o-y) to US$24.1 billion.
Meanwhile, the January book-to-bill ratio of the semiconductor equipment industry returned above parity for the first time since May 2012, improving to 1.14 times from 0.92 times in December.
Commenting on this positive development, RHB Research Institute Sdn Bhd (RHB Research) analyst Chan Jit Hoong said, “Once again, improvements were recorded in the Americas and Asia Pacific, where sales jumped 10 per cent and eight per cent y-o-y respectively.
“Not surprisingly, Europe and Japan remained in negative territory, registering declines of five per cent and 12 per cent y-o-y respectively.
“Overall, the four per cent uptick in global chip sales was in line with the World Semiconductor Trade Statistics (WSTS)’s forecast for FY13 (financial year 2013), up 4.1 per cent y-o-y.
“Bookings rose 17 per cent m-o-m (month on month) while billings dipped five per cent month on month (m-o-m).
“Although the drop in billings had somewhat lifted and boosted January’s book-to-bill ratio, we are still impressed with the spike given the strong demand for semiconductor equipment,” the analyst said.
He opined that the three months of positive data could be interpreted as solid evidence that the worst was over for the industry, as well as an indication that the drop in global semiconductor sales had hit bottom.
Despite this positive development, Chan remained ‘cautious’ and ‘prudent’ on the sector in view of recent US budget cuts, opining that US$85 billion cuts (estimated at 0.5 per cent of FY13 gross domestic product) might cause a ripple effect and hurt the country’s domestic economy.
“That said, this renewed risk could potentially cap growth of semiconductor sales in the Americas, which could in turn negatively affect global sales,” he stated.
On the local front, the stocks of two Malaysian players Malaysian Pacific Industries Bhd (MPI) and Unisem (M) Bhd (Unisem) had seen twelve-month relative performance decline of 20.9 per cent and 36.5 per cent respectively, indicating the extent of the industry slump.
However, MPI and Unisem, with market capitalisations of US$163 million and US$194 million respectively, appeared to have seen the worst as the short term relative performance overview for their stocks were flattish, pointing towards diminished price volatility.
Chan left RHB Research’s fair values for stocks MPI and Unisem unchanged at RM2.70 per share and RM0.99 per share respectively.