Technology
Neutral
GLOBAL semiconductor sales bottomed out YoY in Oct 2023 (0.5%) and turned positive in Nov (+5.3%) and Dec (+11.6%). This moderated contraction in 2023 sales to -8.2% (vs. WSTS forecast of -9.4%). The upward momentum sustained into Jan 2024 with a 15.2% YoY increase (from a low base), but a 2.1% QoQ dip attributed to the seasonal lull in Q1’23.
We expect a slow start to CY24 due to the seasonally slow Q1’24 on the heels of the year-end peak demand period for consumer electronics and automotives in Q4’23 (which has been slightly underwhelming given the weak global economy). We are also mindful of the scheduled plant shutdowns during the long Chinese New Year break, especially in China. Local players guided for a more meaningful recovery in 2H’24.
In the OSAT space, our preference remains with INARI due to its proactive strategy towards AI-related products. INARI has initiated low-volume production through a single line for its memory customer, with plans to expand to four lines by June 2024. The company has indicated that this venture into memory products will eventually position it to capitalise on the growing demand for AI applications, as memory plays a crucial role alongside graphical processing power.
In summary, our medium-term outlook on the technology sector remains NEUTRAL as we expect the recovery momentum to take place gradually. There will likely be QoQ dips in subsequent quarterly earnings due to the seasonal lull in Q1’24, presenting potential opportunities for longer-term investors to establish positions.