Semiconductor recovery likely in 2010
From OCBC Research
There seems to be a lot of positive news coming out lately for the global semiconductor sector. From industry players to market research firms, calls for the bottoming out of global semiconductor sales and upward revision in their forecasts on better outlook have been rampant.
For example, Chinese foundry provider SMIC last Monday raised its 2Q09 revenue guidance due to strong growth in its customer orders. In capital equipment spending, rises in the book-to-bill ratio for the North America and Japan semiconductor equipment sectors have also provided support on a probable recovery in the industry.
While some industry watchers warn of a possible cooling off in 3Q09 and a W-shaped recovery, all have unanimously projected a positive, and often meaningful, growth in the semiconductor industry for 2010. We think that these developments are good indications of a sooner-than-expected recovery in the semiconductor industry and sustainable profitability among semiconductor companies.
Rebound in global semiconductor sales likely in 2010.
In line with the better-than-expected 1Q09 chip sales and recent positive outlook, we also note that at least two industry watchers had raised their 2009 global semiconductor sales forecasts over the past one month.
Gartner, for one, expects the 2009 industry revenue to fall to 22.4%, slightly better than its 24.1% decline projected in February. This is joined by estimates from World Semiconductor Trade Statistics (WSTS) and Semiconductor Industry Association (SIA), which were projected to hit a similar 21.3-21.6% decline.
For 2010, both WSTS and SIA have projected worldwide semiconductor sales rebound, with growth of approximately 6.5% to 7.3%. More importantly, Asia Pacific is expected to continue to be the fastest growing region, increasing at 8.2% and potentially reaching sales of US$107.6 billion in 2010, according to WSTS.
Upgrading to Neutral
As we look forward into 2010, we have also become more optimistic in our view of the semiconductor industry. While uncertainty is likely to remain high and visibility low, our checks with various companies suggest that any correction in orders, if it happens, is not likely to be as severe as during the Jan-Feb 2009 period. With a likely recovery in sight, we now upgrade the semiconductor sector to Neutral from Underweight. Key risk to our sector rating include an exceedingly high unemployment rate that may hamper overall consumer spending and in turn growth in the semiconductor industry.
Exhibit 1: Worldwide pure-play foundry ranking for 1Q09 (US$'m)
Source: iSuppli, EE Times Asia
Exhibit 2: Worldwide semiconductor capital equipment spending forecast (US$'m)
Source: Gartner, EE Times
Disclaimer
This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally.
Privileged/Confidential information may be contained in this message. If you are not the addressee indicated in this message (or responsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions, conclusions and other information in this message that do not relate to the official business of my company shall not be understood as neither given nor endorsed by it.
Co.Reg.no.:198301152E
Published by OCBC Investment Research Pte Ltd
|
