Chip stocks battle hits up: who will take the cake?
Semiconductors are very important and are used for a wide range of applications such as consumer & electronics, 5G/6G communication, energy, robotics, quantum computing, data centres, healthcare, agriculture, electric vehicles, autonomous vehicles, AI, IoT (Internet of Things) and so on.
The global semiconductor industry were dominating headlines since 2020, when the pandemic forced the world to shut down. The lockdowns accelerated the use of digitalisation and the impact on lives and businesses were felt like never before, and in turn, semiconductor markets boomed. By 2021, sales grew by more than 20% to about USD600 b in 2021.
Short-term outlook
But the short-term outlook for semiconductor revenue has worsened. Rapid deterioration in the global economy and weakening consumer demand will negatively impact the semiconductor market in 2023. The global semiconductor market is forecast to shrink 3.6- 4% in 2023 to USD557 b - USD596 b.
The global semiconductor market this year will mainly be dragged down by the memory segment. This category is projected to fall to USD112 b this year, dropping by 17% compared to 2022. The memory market is witnessing faltering demand, swollen inventories and customers pressing for considerably lower prices.
The semiconductor sector is cyclical. In the current cycle, it is on a significant downward trend that started in the second half of 2022. The current short-term downturn is the result of factors including increasing inflation, geopolitical unrest, and lingering effects of the pandemic.
Long-term outlook
The long-term growth prospects for this sector remain very promising, as chips continue to make the world smarter, more efficient, and better connected. The semiconductor industry is poised for a decade of growth and by 2030, it is projected to become a trillion-dollar industry.
$NVIDIA(NVDA.US$ has guided for USD6.5 b in revenue for Q1 of FY2024 (roughly Q1 of the 2023 calendar year), a 21% y-o-y decline. But its price had surged on the AI hype. It is overvalued and now trades at a forward P/E of 53, an 18% premium to its average P/E over the past decade. Its stock has gotten more expensive despite an expectation for slower growth moving forward.
China ban
The U.S. has banned the sale of advanced chips and equipment to China and the Netherlands has joined in. Japan and the Western countries may also join in. Since China is a significant buyer of semiconductors, the chips stocks' revenues and profits will be affected.
In response, China has pledged to be self- reliant and plan to invest billions of dollars in the chip industry. China has pledged to invest an additional US$1.9 b into Yangtze Memory Technologies Co., the country's biggest maker of memory chips. SMIC has been investing aggressively to expand capacity in China. The company said its capital expenditures in 2023 are expected to stay roughly the same as the USD6.35 b it spent in 2022, despite warning of a more difficult year ahead given a slump in the semiconductor industry.
Shares in Chinese suppliers of materials for semiconductors surged after unsubstantiated reports of impending Japanese export curbs circulated on social media.
Shenzhen RongDa Photosensitive Science & Technology Co, supplier of compounds known as photoresists that are essential in chipmaking, soared 20% on Mar 8. That leap, which follows a 20% gain the previous day, came after several posts on WeChat that an unnamed Japanese company had cut off supplies of the compound. Japanese companies are the world's biggest producers of photoresists.
On mainland exchanges on Mar 9, Rongda peer Jiangsu Nata Opto-electronic Material Co climbed 2.7%, while Crystal Clear Electronic Material Co rose 0.9%.
Veteran emerging-markets investor Mark Mobius said he is betting big on semiconductor shares that could benefit from that investment from Beijing.
Hence, China chip stocks may be the sector in invest in as China pours billions of dollars in its quest to be self- reliant.
$CSI 300 Index(000300.SH$ $SSE Composite Index(000001.SH$ $SMIC(00981.HK$ $SMIC Concept(BK0709.SH$ $Shenzhen Rongda Photosensitive & Technology(300576.SZ$ $Jiangsu Nata Opto-electronic Material(300346.SZ$ $Crystal Clear Electronic Material(300655.SZ$ $Dow Jones Industrial Average(.DJI.US$ $Nasdaq Composite Index(.IXIC.US$ $S&P 500 Index(.SPX.US$ $Chevron(CVX.US$ $TENCENT(00700.HK$ $Tencent(TCEHY.US$ $Alibaba(BABA.US$ $BABA-SW(09988.HK$ $Baidu(BIDU.US$ $BIDU-SW(09888.HK$ $BYD COMPANY(01211.HK$ $BYD Co.(BYDDF.US$ $JD.com(JD.US$ $MEITU(01357.HK$ $Hewlett Packard Enterprise(HPE.US$ $Intel(INTC.US$ $Advanced Micro Devices(AMD.US$ $Meta Platforms(META.US$ $Alphabet-C(GOOG.US$ $Alphabet-A(GOOGL.US$ $Microsoft(MSFT.US$ $Tesla(TSLA.US$ $Apple(AAPL.US$ $Ford Motor(F.US$ $Taiwan Semiconductor(TSM.US$ $ASML Holding(ASML.US$ $AEM SGD(AWX.SG$ $Rex Intl(5WH.SG$ $RH PetroGas(T13.SG$ $Geo Energy Res(RE4.SG$ $Golden Energy(AUE.SG$
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soyabean89 : Bull sensei,
Sorry highjack ur post on semichip. I cant find your post about commodities after i close app to search some info. Hope you dont mind
any view of lithium theme? I aware that ev are going into price war in china and usa... But shouldnt this also drive up demand for li ion battery?
Also per 1 of the analyst from susquehanna mentioned about semiconductor going recovery phase as its been 3 yr since the mad rush for digital device during covid lockdown, transition to remote working. He was bullish on semiconductor aspect as 3 yrs its about time for some business to change their device. Especially when window manage to integrate chatgpt to latest office
This would also drive up demand for li battery for laptops and mobile device..?
Also smart chips for automobile. I notice GFS has been very very resilience compared to intel
bullrider_21OP soyabean89: Most people have already bought PC and other devices early in the pandemic. Together with high inflation, geopolitical tensions, etc, the sector is in a down turn now. It is still positive in the long term.
For lithium price, you must take into account that it has already risen a lot. So there will also be a big correction. So buy lithium stocks only after the correction.