KUCHING: The semiconductor sector has recorded a second consecutive year on year (y-o-y) decline, with analysts noting that China is the sole source of growth and that the book-to-bill ratio is expected to weaken. According to the research arm of TA Securities Holdings Bhd (TA Research), global semiconductor sales resumed in its current path, declining three per cent y-o-y to US$27.7 billion in August.
“The decline was attributed to a range of factors, namely a slight softening of demand in recent months, currency devaluation and regular market cyclicality.
“Nevertheless, measured on a cumulative basis, sales remained higher in comparison to the same period of last year,” it said.
The research arm added that revised a month ago, World Semiconductor Trade Statistics (WSTS) is forecasting a 2.3 per cent y-o-y growth in semiconductor sales to US$343 billion in 2015 – driven by smartphones and automotive applications.
TA Research noted that by geographical segments, declines were witnessed across all regions apart from China (up 4.4 per cent y-o-y).
“Sourced as an inspiration for growth in recent times, sales in the Americas fell by 3.5 per cent y-o-y, after 27 months of positive y-o-y growth.
“Marginally positive, the pace of decrease within Europe and Japan appears to have bottomed out, registering falls of 12.4 per cent y-o-y and 13 per cent y-o-y respectively,” it said.
The research arm recalled that the large decline within Europe and Japan are largely attributed to the devaluation of its currency relative to the US dollar.
“Meanwhile, Asia Pacific/All Others registered a 2.3 per cent y-o-y decrease,” it added.
On another note, TA Research said that taken as a potential indicator of future outlook, the book-to-bill ratio remained healthy at 1.06-fold – as bookings outpaced billings. It further noted that total bookings increased by 23.9 per cent y-o-y to US$1,667 million, while billings advanced 21.9 per cent y-o-y to US$1,576.1 million.
“However, there is the possibility that trends may moderate on the back of softer near term economic outlook and weakness in certain electronic sectors,” the research arm said.
TA Research noted that in line with local reports, while a slowdown is evident in certain segments, demand related to key products such as smartphones remain strong.
“Providing a preliminary indication of sales for the new iPhone 6S, Apple reported a record 13 million units of iPhones sold in its debut weekend – beating expectations,” it said.
Although the figure includes sales from China which were not present in the same period last year, the research arm viewed the news as positive.
TA Research further noted that the numbers were in spite of heightened demand in the previous year, driven by a complete redesign of the phone and introduction of the iPhone 6 Plus model.
It expected the news to translate well for local players such as Inari Amertron Bhd (Inari), Malaysian Pacific Industries Bhd (MPI) and Unisem (M) Bhd (Unisem) as smartphones make up circa 30-50 per cent of their total sales.
All in, TA Research reiterated its ‘overweight’ conviction on the semiconductor sector.
“Drivers for the sector include a continued weakening of the ringgit relative to the US dollar and healthy demand within key product segments,” the research arm said, adding that it had ‘buy’ recommendations on MPI, Inari Amertron and Unisem.