1. 5G At Our Doorstep
The semiconductor industry is famous for its boom bust cycles. The latest down cycle started around January 2018, about one and a half year ago, But recently, there are indications that the worst is behind us and the industry is entering a new boom cycle.
The main growth driver is 5G. As early as few months ago, 5G was still a vague concept. But if you have been following developments in the semiconductor industry, you will notice that 5G is fast becoming a reality. Hardware producers such as Huawei, Ericsson and Nokia are busy getting base stations ready for mobile operators while smart phone makers such as Apple, Huawei, Xiaomi, Oppo, Vivo and Samsung are placing orders for new chips for their upcoming 5G phones.
2. A Supercycle, Bigger Than Anything We Have Ever Seen Before
Who are the beneficiaries ? To answer this question, we need to look at what 5G can do.
First of all, 5G is fast. This means that 5G base stations and smart phones will have to make use of the most advanced chips in town. This will benefit makers of modem and processors such as Qualcomm, Broadcom, Intel, AMD, Nvidia, Xilinx, etc.
Secondly, 5G need huge memory. Due to its high speed, 5G users can do many things that 4G cannot do. For example, Augmented Reality, highly sophisticated Games, etc. As such, 5G phones will have substantially higher memory storage than those of 4G. For example, Samsung's recent 5G phone will have 12GB memory. This will benefit producers of Solid State Memory. Micron is one good example.
With its huge bandwidth and capacity, 5G will also enable Internet of Things. Millions and billions of appliances and gadgets used in our daily life such as air cond, lighting, security devices, medical devices, pumps, compressors, engines, machines, etc will in the future be linked to data centres via internet, creating a smart society whereby real time information are continuosly transmitted, monitored and processed so as to optimise performance. This will benefit makers of sensors and passive components.
This will in turn create the need for servers to process all the information. This will benefit server makers and Hard Disc Drives manufacturers.
On top of that, the advent of articifical intelligence and autonomous driving (enabled by 5G) will also create huge demand for semiconductors.
In view of the foregoing, I believe that we are entering a super boom cycle for semiconductors that can last for many, many years. In the coming next one or two quarters, technology companies such as Inari, MPI and Unisem might be releasing weak results due to lag effect. But don't write them off. Keep an open mind and look for opportunities. We could be entering a golden era for technology stocks.
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