MIDF bullish on local semiconductor industry Print E-mail

Source: Business Times (Jan 7, 2014)

MIDF Research is upbeat on the resurging semiconductor industry on the back of buoyant demand for smartphones and tablets and has chosen Unisem and Globetronics stocks as its top picks.

It said in its research note that with the exception of Japan, global semiconductor sales reached a record US$305.6 billion (RM1 trillion) in 2013, spurred by new model roll-out by reputable phone manufacturers.

"Both global semiconductor and book-to-bill sales (unbilled sales) reinforced our positive view on the semiconductor sector and we expect this momentum will continue to be seen this year, on the back of buoyant demand for smartphones and tablets. Our top pick resides with Globetronics due to its exposure in the right segment," MIDF told investors, giving the sector a positive recommendation.

It said book-to-bill ratio remains above parity for the month of December 2013 with both bookings and billings recording strong yearly growth of 48.3 per cent and 33.8 per cent, respectively, which may lead to higher capital expenditure spending moving forward.

It added that 30 per cent of companies will also use biometric identification by 2016, of which The Gartner report predicts that at least 30 per cent of organisations will use the technology similar to the Touch ID feature on the latest iteration of the iPhone to efficiently and effectively secure and manage mobile devices connected to their networks without irritating users in the process.

This could provide another source of avenue for technology companies to tap into and in our view, we do not discount the possibility that phone manufacturers will follow the footsteps of Apple the company that introduced Touch ID into iPhone 5S.

"We reiterate our bullish stance on the semiconductor industry and we believe the industry is still riding on the upcycle and we do not foresee any letdown in global semiconductor sales in the immediate term."

New launches of smartphones and tablets are expected to keep the market in an upbeat mood and this bodes well for technology companies that ride on these products.

Global semiconductor sales reached a new record of US$305.6 billion last year, supported by higher sales from across the regions and with the exception of Japan, growth from the Americas surpassed its peers, which recorded a 13.1 per cent increase in sales.

In comparison, sales from Europe and Asia Pacific grew at a slower pace of 5.2 per cent and seven per cent respectively.

On the contrary, sales from Japan did not outperform due to the weakening of its currency.

However, sales has been increasing, albeit at a slow pace, since the second half of 2013.

Should this be extrapolated into 2014, it expects a better sales figure ahead.