January 2024 Global Semiconductor Sales -2.1% MoM & +15.2% YoY

In January 2024, the global semiconductor saw its strongest YoY sales growth since May 2022. According to the Semiconductor Industry Association, global semiconductor sales during the month stood at USD47.6bn (-2.1% MoM, +15.2% YoY) versus December 2023’s of USD48.7bn. This marked YoY sales recovery for the 3rd consecutive month, signalling that it could be the beginning of a new upcycle. The substantial YoY improvement was largely driven by China (+26.6% YoY), Americas (+20.3% YoY), and Asia Pacific/All Other (+12.8% YoY). As the global semiconductor market is on track to recovery, the market growth is projected to continue over the remainder of the year, with annual sales forecasted to increase by double-digits in 2024, largely fuelled by robust double-digit growth from memory and single-digit growth from discrete, sensors, analogue, logic and micro.

Slowdown in MoM Sales

By geography, January 2024’s sales decline of 2.1% MoM was on the back of easing across all regions, mainly from Japan (-3.9% MoM), Europe (-2.8% MoM), and China (-2.5% MoM). Meanwhile, slowdown was also observed in other regions including Americas (-1.5% MoM) and Asia Pacific/All Other (-1.4% MoM).

Seeing Healthy Capacity Growth

According to the World Fab Forecast report, the global semiconductor capacity is expected to grow by 6.4%, reaching a record high of 30mn wafers per month (wpm) in 2024. The growth will be mainly supported by capacity increases in leading-edge logic and foundry, applications including generative AI and high-performance computing, and end-demand recovery for chips. Meanwhile, the global semiconductor industry will likely see 42 new volume fabs in 2024, mainly backed by healthy expansion from China and Taiwan. The Chinese chip manufacturers are expected to begin the operation of 18 new fabs in 2024, with a 13.0% YoY growth to 8.6mn wpm. Additionally, Taiwan is expected to register 4.2% YoY growth to 5.7mn wpm in 2024, with an additional five new fabs to begin operation soon.

Maintain Overweight

In all, we reiterate our OVERWEIGHT stance on the technology sector. We expect the sentiment of the semiconductor sector in Malaysia to improve gradually, underpinned by an anticipated recovery in the global demand as well as increasing trade diversion opportunities as a result of the China Plus One strategy. Within our universe, the top picks are INARI and MPI.

For INARI (TP:RM3.55), we remain optimistic about the group’s outlook, backed by the healthy earnings contribution from the radio frequency segment. Besides, we believe the new plant in China will become the next earnings driver once the semiconductor sector in China starts to pick up. Meanwhile, we continue to like MPI (TP: RM32.35) due to its strengthening product portfolio and automotive-centric strategy. The group will continue to focus on China’s fast-growing electric vehicle market, with the target for the automotive segment to contribute over 50% of the group’s revenue over the next few years. Meanwhile, we upgraded our recommendation on ELSOFT (TP: RM0.59) from Hold to Buy given the stock’s improved risk reward potential following the recent share price weakness. On the other hand, we maintain a Hold call on UNISEM (TP: RM3.56).

Key downside risks include: i) heightened geopolitical tensions weighing on economic growth and disrupting supply chains, ii) weaker-than-expected sales, and iii) weakening of the USD against the Ringgit.

Source: TA Research - 13 Mar 2024