KUALA LUMPUR (Aug 4): TA Securities Research has reiterated its overweight stance on the semiconductor sector as the global semiconductor sales uptrend persists.
The research house’s analyst Wilson Loo said in a note today that the call is premised on the robust demand for chips, underpinned by the ongoing acceleration in digitalisation amid the Covid-19 pandemic and proliferation of emerging technologies like 5G, artificial intelligence, cloud computing, Internet of Things, and robotics.
It was reported that global semiconductor sales in June continued trending upwards as they climbed 2.1% month-on-month (m-o-m) and 29.2% year-on-year (y-o-y) to US$44.5 billion (RM188.15 billion).
On a year-to-date basis, semiconductor first half’s sales increased 23.5% y-o-y to US$256.9 billion (RM1.09 trillion), marching towards the World Semiconductor Trade Statistics organisation’s forecast for global semiconductor sales to reach a record high of US$527.2 billion (RM2.23 trillion) (+19.7% y-o-y) in 2021, noted Loo in his report.
He noted that billings in June also climbed a further 2.3% m-o-m and 58.4% y-o-y to US$3.67 billion (RM15.52 billion), marking a record high for the sixth consecutive month.
Cumulatively, billings in the first half increased 45.2% y-o-y to US$20.14 billion (RM85.15 billion), he added.
According to the US-based Semiconductor Equipment & Materials International (SEMI), the robust investments in semiconductor equipment reflects the semiconductor industry’s push to address the prevailing global chip shortage.
“The robust spending on equipment is also expected to extend into the years ahead alongside the ramp-up in fab capacity to meet strong demand for chips from emerging applications like 5G to 6G communications, artificial intelligence, autonomous vehicles, and high-performance computing,” it said.
Within the semiconductor universe, Loo has "buy" recommendations for Inari Amertron Bhd (target price [TP]: RM4.25), Unisem (M) Bhd (TP: RM11.80) and Malaysian Pacific Industries Bhd (MPI) (TP: RM51.20).
“We continue to favour outsourced assembly and test providers including Inari, Unisem, and MPI for their strong sales pipeline and earnings growth prospects,” he said.
Meanwhile, he placed his "sell" recommendation on Elsoft Research Bhd (TP: 66.5 sen) under review pending a company update.
Key downside risks for the sector, he said, include a prolonged Covid-19 pandemic weighing on economic growth and sentiment, a heightened trade war, weaker-than-expected sales, and a weakening of the US dollar against the ringgit.