Recovery of global semiconductor demand hinges on China, says Kenanga
KUALA LUMPUR (Dec 21): Kenanga Research has maintained its “neutral” rating on the technology sector after the World Semiconductor Trade Statistics (WSTS) changed its forecast for global semiconductor demand growth in 2023 to a contraction of 4.1% in end-Nov 2022 (from a 4.6% expansion forecast three months before).
In a sector update on Wednesday (Dec 21), the research said it believes that the WSTS outlook revision was due to the prolonged supply-chain disruptions in China as well as a steeper inventory adjustment cycle.
It said that on a brighter note, certain multinational semiconductor players are nonetheless going ahead with their investment in new semiconductor foundries as they are taking a long-term view on global tech demand.
“This will benefit contractors including gas infrastructure providers.
“Another bright spot is the recession-proof cybersecurity service.
“Our top picks for the sector are Kelington Group Bhd (OP; TP: RM1.80) and LGMS Bhd (OP; TP: RM1.50),” it said.
Meanwhile, Kenanga said automotive-centric players such as D&O Green Technologies Bhd (MP; TP: RM3.51) have indicated that its seasonally stronger 4Q may not materialise as car manufacturers are prioritising clearing off existing built-up inventory and have toned down order forecast for the next two quarters in anticipation of heightened economic uncertainty.
It said such sentiment has been echoed by the likes of JHM Consolidation Bhd (MP: TP: RM0.90) which is also involved in the automotive LED segment.
It said this in turn pushes the automotive segment into the ongoing inventory adjustment cycle which the smartphone and PC segments are already experiencing since early this year.
“As a saving grace, there isn’t any cancellation of orders for the automotive segment but deferment as the automotive players remain sanguine of their long-term prospects, especially for electric vehicles.
“The recovery of global semiconductor demand will hinge on China, given its commanding market share.
“However, with no clear signs on how the country can fully extricate itself from the epidemic, supply chain challenges are expected to remain going into 2023,” it said.
http://www.theedgemarkets.com/article/recovery-global-semiconductor-demand-hinges-china-says-kenanga
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