Firms to gain from strong chip demand
03 Nov 2021
TA Securities Research is optimistic about outsourced assembly and test providers in the semiconductor sector for their strong sales pipeline and earnings growth prospects supported by their expansion plans and robust net cash position.
The companies included Inari Amertron Bhd, Unisem (M) Bhd and Malaysian Pacific Industries Bhd.
The research house kept its “overweight” stance on the semiconductor sector with a “buy” call on all the companies under its coverage.
“We expect them to continue benefitting from the structural growth in chip demand, underpinned by the ongoing acceleration in digitalisation and proliferation of emerging technologies like 5G, artificial intelligence, cloud computing, Internet-of-Things, and robotics during the pandemic.
“Amid the environment of tight chip supply, we expect improved pricing power for outsourced assembly and test providers in the interim to help them cushion cost pressures in an inflationary environment,” it added.
TA Securities Research said key downside risks to its call included a heightened trade war, weaker-than-expected sales, weakening of the US dollar against the ringgit as well as a prolonged Covid-19 pandemic, which would affect economic growth, sentiment and supply chains.
In September, the research house pointed out that global semiconductor sales increased 1.9% month-on-month and 27.6% year-on-year (y-o-y) to a new record high of US$48.3bil (RM200.42bil).
On a quarterly basis, sales in the third quarter of 2021 rose 7.4% quarter-on-quarter and 27.6% y-o-y to US$144.8bil (RM600.85bil) with chip shipments also reaching all-time highs amid the industry’s push to meet strong global demand, according to the research house.
“On a year-to-date basis, sales for the first nine months of 2021 grew 25.4% y-o-y to US$403bil (RM1.67 trillion) and is on track to meet the World Semiconductor Trade Statistics Organisation’s forecast for global semiconductor sales in 2021 scaling 25.1% y-o-y to a new record high of US$550.9bil (RM2.29 trillion).
Source: The Star