Demand for semiconductor products to stay strong, but trade war fears linger
KUCHING: The demand for semiconductor products are expected to remain robust but there is still lingering fears of a trade war between major economies, analysts say.
MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) noted that the growth rate of monthly worldwide sales of semiconductor has trended lower mainly due to the high base effect.
Moving forward, it pointed out that the annual growth rate is expected to taper off to single digit in 2018 according to World Semiconductor Trade Statistic (WSTS).
“Nonetheless, we expect demand for semiconductor products to remain robust, driven by new smartphone line- up, expected recovery in the tablet market, and stable demand from the automotive industry,” it opined.
However, it highlighted that capital spending is expected to grow at a slower pace and this could negatively impact the dividend payout ratio of stocks under its coverage.
Meanwhile, it also highlighted that the trade war between the US and China has created fear among the investors.
“Should the trade war intensified, it could negatively impact the earnings prospect of semiconductors companies under our coverage.
“Nonetheless, our channel checks indicate that there is no change to volume order at this juncture. Should the trade war intensified, we do not discount the possible that future earnings outlook of these companies could be affected,” it commented.
Beyond the possibility of a trade war between US and China, MIDF Research pointed out that China has introduced tax breaks for chipmakers made in the country.
“We view that the move may lead to higher earnings for local semiconductor players which have operations in China,” it said.
It noted that the move came at a time when the government is seeking to reduce dependency on foreign semiconductors amid trade tensions with the US over technology transfers.
“Chipmakers will be exempted from corporate taxes for two to five years followed by partial deductions. The exemptions cover a range of products, from very basic to cutting-edge chips, for use in computers, smartphones and other electronic devices,” it added.
Under its coverage, MIDF Research said both Inari Amertron Bhd and Unisem (M) Bhd have operations at Kunshan and Chengdu respectively.