Semiconductor sales to go up as new phones expected in 3Q
The growth rate of monthly worldwide sales of semiconductor has trended lower mainly due to the high base effect. MIDF Research
KUCHING: Monthly sales of semiconductor products are expected to pick up towards the end of the second quarter of 2018 (2Q18) as in preparation of various flagship smartphone launches in 3Q18, analysts said.
In a report, the research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research) said despite the expected slowdown in semiconductor products sales according to World Semiconductor Trade Statistic (WSTS) and the USChina technology trade tensions, it expected demand to remain robust and sales to pick up in 2Q.
It explained, “The growth rate of monthly worldwide sales of semiconductor has trended lower mainly due to the high base effect.
“Moving forward, the annual growth rate is expected to taper off to single digit in 2018 according to 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. Capital spending will continue to growth, albeit at a slower pace.”
In the near-term, the research team pointed out that worldwide sales of semiconductor products advanced by 20 per cent yoy to US$ 37 billion which represents the 20th consecutive months of year-over-year sales improvement since August 2016.
“Higher sales were recorded across all major regional markets and all semiconductor product categories, especially for the memory product segment. Meanwhile, on a monthly sequential basis, the global semiconductor sales (GSS) only grew marginally by 0.7 per cent y-o-y.
“This is in-line with the typical seasonal market trends,” it noted.
“Premised on this, we expect the monthly sales to pick up, on a sequential basis, towards the end of 2Q18 in preparation of various flagship smartphone launches in 3Q18,” MIDF Research projected.
Meanwhile, the research team noted that despite US’ threats against China’s semiconductor industry, China’s state-backed semiconductor fund, known as the National Integrated Circuitry Investment Fund, is near to closing a 120 billion renminbi (US$19 billion) investment round for a second fund to boost the local chip production and technologies.
“The fund is expected to increase the local supply to make up at least 40 per cent of China’s semiconductor needs by the middle of the next decade.
“We expect the move will support the growth in semiconductor equipment spending and ultimately spur the sale of semiconductor products in the long run,” MIDF Research opined.
It also pointed out that China’s smartphone market is expected to stage a comeback.
It explained, “Taiwan Semiconductor Manufacturing Co Ltd (TSMC) has revised its full-year revenue target lower partially due to soft demand for premium phones.
“Apple is believed to be the primary reason for this decline in the revenue forecast. On the contrary, Qualcomm issued an optimistic forecast for the current quarter indicating that China’s smartphone market is pointing toward a recovery in demand.
“Qualcomm will stand to benefit because its supplying manufacturers in China are growing by taking market share from Apple. Recall that smartphones shipments in China fell by 21 per cent y-o-y.”
All in, while MIDF Research believed that demand is expected to remain robust, it does not discount the fact that the trade tension between the US and China could impact earnings prospects of semiconductor companies under its coverage.
Hence, it pegged a ‘neutral’ rating on the sector.