• Global semiconductor sales rose by 18% YoY to USD51.8bn in May driven by solid demand across all major markets.

• China market reported a slower growth however due to the shutdown of production facilities amid strict COVID-19 lockdown policies. We expect China market to regain momentum from June onwards following the lifting of lockdown restrictions in Shanghai, Beijing, and peripheral cities thereafter.

• Maintain OVERWEIGHT call on technology sector with Inari (BUY; TP: RM3.75) and MPI (BUY; TP: RM44.20) emerge as our top pick.

Global Semiconductor Sales Remained High in May 2022

The Semiconductor Industry Association (SIA) announced that the global semiconductor sales rose by 18% YoY in May 2022 to USD51.8bn. For YTD, the semiconductor sales grew by 23% YoY to USD254bn which makes up 42% of the World Semiconductor Trade Statistics (WSTS) full year 2022 forecast of USD601bn. Strong growth in global semiconductor sales was seen across all major regional markets driven by higher 5G smartphone sales, recovery in automotive sector and growing electrical vehicles (EVs) sales, strong demand for data centers, thanks to greater usage of internet, cloud services, social media, video streaming, to name a few.

China Market to Regaining Momentum from June Onwards

The US market recorded the strongest growth in May following a 37% increase in semiconductor sales, followed by Japan (+20% YoY), and Europe (+16% YoY). China market reported a slower growth however (+9% YoY), in line with our estimates no thanks to the shutdown of production facilities amid strict COVID-19 lockdown policies. China market remains the largest contributor in the global semiconductor sales given its steady market share of 33%. Note that China market is expected to improve from June onwards thanks to the lifting of lockdown restrictions in Shanghai, Beijing, and other cities thereafter.

OVERWEIGHT Call on the Sector

We maintain OVERWEIGHT call on the semiconductor, Technology sub-sector with a BUY call on Inari (TP: RM3.75) and MPI (TP: RM44.20).

Source: BIMB Securities Research - 8 Jul 2022