Chip inventory facing correction
28 Jul 2022
While global inventories of chips for automotive and industrial applications remain low, chips for global personal computers and Chinese smartphones are undergoing an inventory correction, according to Nomura Asset Management UK senior equity analyst Takeshi Kawamoto.
“It takes two to three years to build a semiconductor fabrication plant (fab), and there are plans for more capacity, but for automobiles and industrial applications. In the next six to 12 months, I think there will be a recession and demand will go down.
“Right now, inventories are low but they will go back to normal,” Kawamoto told a media briefing at the launch of the Nomura global syariah semiconductor equity fund here. Nomura Asset Management Malaysia managing director and country head Leslie Yap said demand for chips in the 5G and communications infrastructure space would continue to remain stable.
“If you are building a 5G network, you cannot time it – it’s not like today, I cut back on installation of my 5G network because the economy is slowing down.
“Telecommunication companies will continue to invest in 5G,” said Yap.
Also present was Malaysia Semiconductor Industry Association president Datuk Wong Siew Hai, who said based on recent newsflow, there would be RM51bil of new investments into the semiconductor industry in Malaysia by companies such as Intel Corp, Infineon Technologies AG, TF-AMD, JF Technology Bhd, Sensata Technologies, Ferrotec Holdings Corp, Unisem (M) Bhd, AT&S and TTM Technologies Inc which would create 11,000 jobs.
Wong noted that in 2021, the electrical and electronic products industry contributed RM456bil or 37% of total exports (18% growth year-on-year), and consisted of 56% of Malaysia’s trade surplus and also, resulted in a 12% growth in labour productivity.
Wong pointed out that in 2022 and 2023, 10 new fabs are expected to be built globally each year.
“Over the next 10 years, we can expect more than 90 new fabs to be built,” he said.
Meanwhile, Nomura Asset Management Malaysia, quoting data from World Semiconductor Trade Statistics, said the global semiconductor market is projected to grow by 8.8% in 2022 to US$601bil (RM2.68 trillion).
The fund manager pointed out that in transitioning to 5G, end users wouldbe upgrading their equipment and devices – from mobile phones to networks, and two industries of continued growth are connectivity and mobility, as well as computing accelerators.
The fund manager also noted that according to Digitimes Research, sales of global wafer foundry manufacturers are likely to grow 15% in 2022.
“Driving foundry demand is 5G technology. There is still room to grow, as 5G smartphone penetration is at 50% at end-2021.
“Central processing units, graphics processing units and artificial intelligence (AI) accelerator foundry services will remain strong in 2022,” said the fund manager.
Nomura Asset Management Malaysia pointed out that semiconductors would continue to grow in importance as the world becomes more digital, and the drivers are technologies such as 5G, AI, the Internet of Things, cloud and autonomous driving or electric vehicles.
The fund noted that global companies that would benefit included Broadcom Inc, Xilinx Inc, Marvell Technology Inc, Nvidia Corp, Advanced Micro Devices Inc or AMD, Intel, Analog Devices Inc, Texas Instruments, Qualcomm Inc, Micron Technology Inc, NXP Semiconductors NV, Infineon Technologies AG, and STMicroelectronics NV.
Yap said the Nomura global syariah semiconductor equity fund would offer investors access to the rapidly growing semiconductor sector driven by global digitalisation trends.
“We continue to innovate and offer investors opportunities to invest in assets with strong potential for growth and long runways.
“The acceleration in digitalisation including the rollout of 5G networks has intensified the need for greater connectivity, giving rise to an exponential surge in computing needs and demand for semiconductor chips, which are essential components of most electronic devices,” said Yap.
According to Nomura Asset Management, the fund is available for a minimum initial investment of RM1,000 or US$1,000 (RM4,459).
Nomura Asset Management UK Ltd is the investment adviser to the fund and will provide investment research and stock recommendations in line with the fund’s investment objectives and restrictions.
Managed by Nomura Asset Management’s award-winning global equity team, the fund focuses on quality companies with high growth potential, healthy profit margins and strong intellectual property, pricing power and balance sheets.
The strategy is backed by fundamental analysis identifying quality names with distinct competitive advantages, solid governance, stable cash returns to shareholders, and a consistent track record of attractive returns on capital.
A minimum of 70% of the fund’s net asset value (NAV) is to be invested in syariah-compliant equities and equity related securities, and a maximum of 30% of the fund’s NAV are to be invested in Islamic money market instruments, deposits or held in cash.
Source: The Star