Business

Monday September 14, 2009

Semiconductor industry recovering

By YEOW POOI LING


Stabilising US economy and further growth in China augur well for industry

PETALING JAYA: The semiconductor sector looks set for a sustainable recovery on the back of the stabilising US economy as well as further growth in China supported by its large fiscal stimulus.

Last month, the Semiconductor Industry Association reported that worldwide sales of semiconductors in July rose 5.3% to US$18.2bil compared with June’s US$17.2bil.

The association noted that the year-on-year rate of decline had moderated as the year progressed. For the first half year, an average monthly year-on-year decline was 25%, while July’s sales were 18.2% lower than the corresponding month in 2008.

The fifth consecutive month of sequential increases in semiconductor sales reflected the improving demand in the consumer sector, it added.

TA Securities believes global chip sales would meet the association’s forecast of US$195.6bil as the sales year-to-date have reached US$111.7bil.

“There is also a big possibility that chip sales will surpass the association’s estimates given the stronger second-half year expected on the back of a more sanguine economic outlook,” it said.

The stimulus plan implemented by the China government, coupled with the launch of third-generation technology, would be the catalyst for higher earnings.

“The current pick-up in global chip sales is due to a combination of inventory replenishment as well as the preparation for demand uptick in the second half due to more optimistic worldwide GDP (gross domestic product) growth estimates,” TA said.

An analyst of a bank-backed brokerage said the first quarter was “probably one of the worst quarters in memory,” following which, there had been some inventory re-stocking and gradual recuperation in consumer demand, which boded well for the sector and signalled that the recovery was on track.

“China has been picking up the slack from the slower US and European markets but we would need to see more signs of a worldwide recovery to truly call the sector back into health,” he said, adding that there were views of a double dip materialising in the fourth quarter while 2010 outlook remained uncertain.

Unisem (M) Bhd chairman and group managing director John Chia Sin Tet said there had been significant recovery in the industry since the second quarter and the second-half year were likely to be substantially better than the first six months.

“The outlook of the semiconductor sector appears encouraging and recovery sustainable in view of the recovery of the US economy and further growth of China due to the large and direct stimulus programme being implemented,” he told StarBiz in an e-mail reply.

The analyst, meanwhile, said prospects of semiconductor companies like Unisem and Malaysian Pacific Industries Bhd were mainly tied to the health of the global economy, which was “perking up and returning to more seasonal patterns.”

“The worst is behind us and quarterly earnings should continue to improve as the year progresses and moving into 2010,” he added.

  • E-mail this story
  • Print this story