Semiconductor Industry

[winston]

Global semiconductor sales up 0.1% y-o-y to US$47.4b in August, says SIA

by Surin Murugiah

Source: theedgemarkets.com

https://www.theedgemarkets.com/article/ ... t-says-sia

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AMD Tumbles After Catastrophic Preannouncement, Drags Down Chip Sector

https://www.zerohedge.com/markets/amd-t ... hip-sector

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半導體景氣下滑中 3年來頭一遭!三星Q3獲利估減25%｜非凡財經新聞｜20221006
https://m.youtube.com/watch?v=YNDv-wha63E

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晶片"柳暗花明又一村"？ 輝達車用晶片"索爾"搶進中國市場 電動車晶片成為中廠發力點？｜20221008｜@王志郁Plus
https://m.youtube.com/watch?v=_c9S2SVuOTA

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Global Chip Rout Vaporizes Quarter Trillion In Value As Earnings Estimates Crater
https://www.zerohedge.com/markets/globa ... -pace-2008

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PM Lee warns US chip curbs can have 'wide ramifications
https://www.theedgesingapore.com/news/s ... ifications

[winston]

US SEMICONDUCTOR – DARKEST BEFORE DAWN

2022 has been a terrible year for the semiconductor sector. The Philadelphia Semiconductor Index (SOX Index), a benchmark index for the semiconductor industry, was down 40% (year to date as of end Sep 2022), underperforming the S&P 500 Index significantly.

Semiconductor geopolitics – carrot and stick strategy. With the evolution of the semiconductor industry as a strategic asset for the economy and national security, the US has devised a carrot and stick strategy in order to restore and enhance the US as a location for reshoring of semiconductor manufacturing capabilities.

The CHIPS Act is the carrot that the US administration is dangling in order to attract global semiconductor players to invest in manufacturing capabilities in the US, doling out funding for the development of new facilities and providing tax credits to reduce operating costs to levels comparable to other jurisdictions.

At the other end of the strategy, the US government is wielding the stick to hinder China’s ambitions of becoming a major global semiconductor supplier by introducing restrictions, bans, and placing Chinese players on entity lists to deny Chinese players the acquisition of advanced semiconductor manufacturing technology.

Where are we in the industry cycle? Due to the unique nature of the pandemic crisis, personal computers (PCs) and server demand had soared in the past two years relative to history. This is now heading in the opposite direction as most economies have emerged from the crisis, tempering corporates and consumers demand for PCs. Given that the duration of the current down-cycle is in-line with past down-cycles, we believe we are deep into the correction and near the tail-end for this cycle.

Are there opportunities in this sector? In a semiconductor down-cycle, valuation de-ratings of semiconductor stocks lead earnings correction. The SOX Index is currently trading below the average blended forward 12-month price-to-earnings (P/E) at the trough of a down-cycle, with earnings per share (EPS) cuts nearing the average declines in a down-cycle.

Coupled with the inventory cycle likely near a turning point, both share prices and valuations are down close to 40% from the peak. With the typical average return of an up-cycle at 85%, we find the current risk-reward of the semiconductor sector attractive.

However, we do not believe semiconductor share prices can defy the trend of a weak broader market. With the macro outlook still murky and uncertain, volatility will continue to dominate and we believe that long-term investors should gradually add exposure on any weakness ahead.

On our preferred picks within the sector, we go with the first-in-first-out principle, with memory makers and players exposed to PC and mobile our top picks. We prefer Nvidia (NVDA US) and Micron (MU US) within the sector. We like Nvidia as a leading-edge graphics processing unit (GPU) designer that will benefit due to long-term above-trend growth from data centres, artificial intelligence and autonomous driving systems.

Micron is a commodity memory player which will benefit very strongly from a recovery in memory market. Both players have entered the down-cycle first, with share prices down 44% for Nvidia and 63% for Micron from recent peaks, and significant EPS cuts (88% and 31% respectively), which suggests most risks have been priced in.

Source: OCBC

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SK Hynix cuts capex in half with 'unprecedented' demand drop
https://www.theedgesingapore.com/news/s ... emand-drop

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The Semiconductor Shortage Just Quickly Became An Inventory Glut
https://www.zerohedge.com/markets/semic ... ntory-glut

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In 2020, The Most Traded Global Good Was Not Crude Oil But Semiconductors
https://www.zerohedge.com/economics/202 ... conductors