- Global semiconductor sales hit another record high in April 2022, an increase of 22% yoy to US$50.93bn, powered by strong demand across all range of critical sectors.
- Tepid growth was recorded for the China market however no thanks to strict COVID-19 lockdown policies which pushed shutdown in most production facilities. This is expected to persist in May 2022 before showing some improvement in June following the easing of lockdown restriction in Shanghai and Beijing on the 1 st June 2022.
- Despite global supply chain disruptions, we remain sanguine on the semiconductor outlook banking on a rapid adoption of new technology i.e., 5G, artificial intelligence (AI), internet of things (IoT), electrical vehicles (EV) and therefore, a strong support demand for electronics products.
- Maintain OVERWEIGHT recommendation on semiconductors with MPI (BUY; TP: RM49.40) and Inari (BUY; TP: RM3.75) emerge as our ‘Top Pick’.
Record-Breaking Sales
The Semiconductor Industry Association (SIA) announced that the global semiconductor sales hit another peak in April 2022 at US$50.93bn (Chart 1), an increase of 22% yoy. This was in tandem with strong demand for semiconductor products across a range of critical sectors (i.e., communication, PC/computers, consumers, industrial and automotive).
Slower Growth for China Market due to Lockdown
China market recorded a slowdown following a yoy growth of 13.7%, a pullback versus 21% average growth in 1Q22 (US: +41% yoy, Europe: 20% yoy, Japan: 19% yoy). This was primarily due to China’s strict COVID-19 lockdown policies which saw massive lockdowns, resulting in the shutdown of production facilities during this period. We expect the sluggish growth to persist in May 2022 before regaining some momentum in June following the lifting of lockdown restrictionsin Shanghai and Beijing, to be followed by secondary cities thereafter. It may take some time however for the backlog and hence, the supply chain to normalise though this is a reprieve for the sector especially when China plays a critical role in the global semiconductor supply chain.
Semiconductor Outlook Remains Solid Despite Global Supply Chain Disruption
Despite global supply chain disruptions arising from China strict COVID-19 policy and the Russia-Ukraine, we remain sanguine on the outlook given the strong adoption of new technology i.e., 5G, AI, IoT, EV, to name a few. This will be further pushed by full global economic reopening around the world and a robust consumption pattern post COVID19. According to the World Semiconductor Trade Statistics (WSTS) Fall 2021 Semiconductor Industry Forecast, global semiconductor sales is expected to grow by 8% in 2022 and another 5% in 2023 to US$601bn and US$633bn respectively (Chart 2) which highlight the favourable prospect of the sector.
OVERWEIGHT Call on the Semiconductor
Maintain OVERWEIGHT recommendation on semiconductor, Technology sub-sector with a BUY call on MPI (TP: RM49.40) and Inari (TP: RM3.75).
Source: BIMB Securities Research - 9 Jun 2022
