infolinks

Tuesday, March 27, 2012

Semiconductor sector remains lackluster

Cautiously Optimistic
§  Worldwide sales remain lackluster: recorded seventh consecutive yoy growth contraction with -8.8% reaching USD23.18bn (3 months moving averages) in January 2012.
§  Slightly optimistic outlook: WSTS foresees the market to grow only at 2.6% and 5.8% in 2012 and 2013 respectively, vis-à-vis to the double-digit growth experienced in 2007 and 2009.
§  Highly correlated: MPI and Unisem’s 2012 and 2013 revenue growth will be dictated by the underlying worldwide semiconductor growth trend.
§  Electronics demand: subdued demand in IT/PC markets due to depressed consumer confident as the result of European debt crisis will be offset by better outlook in both telecommunication and automotive industries.
§  Telco market: main catalyst to the recovery of the industry as cellcos leapfrog into 4G/LTE standard and proliferation of smartphones (especially low-cost models) and tablets.
§  Auto market: Higher production of hybrid and electric cars will spur the industry as more IC components are required.
§  We believe that Moore’s Law will continue to spur growth coupled with potential growth in the electronics market. Hence, we expect Malaysian semiconductor packagers to experience moderate growth in 2012.
§  However, the growth would be dwarfed by intense competition from Taiwanese peers, higher input costs and appreciation of MYR against USD along with challenging economic outlook which will eventually hampers consumer confident.
§  While the sector is not expected to revisit the glory days of double-digit growth as in 2007 and 2009, we initiate coverage on the sector with a Neutral rating:
MPI (Hold; TP: RM3.57)
Unisem (Hold; TP: RM1.48)


By HLIB Research 28 March 2012