THE Joe Biden US presidency is poised to see easing of unreasonable bans and erratic policy-making which would restore the semiconductor industry to its glory days.
Such is the expectation of Kenanga Research which foresees a more sensible policy setting compared with the previous administration, thus leading to a more accommodative landscape for the semiconductor sector.
“The (Donald) Trump administration has not just disrupted China’s supply chain but also hurt US firms in turn as the current policy discourages companies from setting up new facilities,” lamented analyst Samuel Tan in a technology sector update
“Not only that US firms are looking to relocate offshore to circumvent the export control restriction, foreign companies may think twice before purchasing US-designed semiconductor manufacturing equipment out of concern that the delivery of US equipment may be unreliable.”
Prospect-wise, Tan noted that China is seen to be firing on all cylinders with the Chinese Government having set up the “Big Fund Phase-2” with an investment sum of 204 bil yuan (US$29.8 bil) to achieve technology self-sufficiency.
Towards this end, Semiconductor Manufacturing International Corporation (SMIC), a partial state-owned listed semiconductor foundry company, has been revising its capex budget aggressively to US$5.9 bil or three times higher than that of FY2019 at US$1.9 bil.
SMIC recently reported a 123% year-on-year jump in profit on record high revenue for 3Q CY2020. Its current utilisation rate is at 100% and the company is guiding momentum to remain strong going into 1H 2021.
Tan also cited a report by DigiTimes which revealed that eight-inch wafer foundries in general are experiencing orders at 20% beyond their supply capacity.
The imminent shortage will likely continue into 2021 and urgent orders will see a 10% increase in pricing, according to the report.
All-in, Kenanga Research expects local beneficiaries to include the likes of Kelington Group Bhd (“Outperform”; target price: RM1.92) who is securing more jobs from SMIC.
“We believe back-end packaging and testing segment will grow along China’s front-end expansion, benefiting Malaysian Pacific Industries Bhd (“Outperform”; target price: RM18.80) and Unisem (M) Bhd (“Outperform”; target price: RM5.15) who has plants in Suzhou and Chengdu respectively,” suggested the research house.
Others include outsourced semiconductor assembly and test (OSAT) equipment makers such as Mi Technovation Bhd which is poised to benefit from rising orders while Inari Amerton Bhd (“Outperform”; target price: RM3.14) has recently formed a joint venture with Singapore-based MIT Semiconductor to develop OSAT equipment. – Nov 19, 2020