September 2024 Global Semiconductor Sales +4.1% MoM & +23.2% YoY

In September 2024, the global semiconductor continued its uptrend by recording another decent sales growth. According to the Semiconductor Industry Association, global semiconductor sales during the month stood at USD55.3bn (+4.1% MoM, +23.2% YoY) versus August 2024’s of USD53.1bn. This marked YoY sales recovery for the 11 th consecutive month, while MoM increased for 7th consecutive month. This shows that the global semiconductor market is in an upcycle currently. The robust YoY improvement was mainly contributed by all regions except Europe. The sales growth was led by the Americas (+46.3% YoY), followed by China (+22.9% YoY), Asia Pacific/All Other (+18.4% YoY), and Japan (+7.7% YoY).

Seeing MoM Sales Growth for 7th Consecutive Month

By geography, August 2024’s sales increase of 4.1% MoM was driven by all regions include Japan (+5.3% MoM), Asia Pacific (All Others) (+4.5% MoM), America (+4.1% MoM), Europe (+4.0% MoM), and China (+3.6% MoM).

Expect Strong Recovery of Worldwide Silicon Wafer Shipment

According to SEMI, the global shipments of silicon wafers are estimated to increase 10% to reach 13,328mn square inches as wafer demand continues to recover from the downcycle. Meanwhile, the strong growth in silicon wafer shipments is expected to persist through 2027, driven by rising demand for AI and advanced processing technologies. Additionally, new applications in advanced packaging and high-bandwidth memory production, which require more wafers, are further contributing to the growing need for silicon wafers.

Maintain Overweight

Despite the near-term earnings of some semiconductor stocks in our coverage are likely to be impacted by the recent strengthening of the Ringgit against the US dollar, we remain optimistic about the medium-to-long term outlook of the semiconductor sector in Malaysia, supported by the ongoing recovery in global demand for semiconductors and PC replacement cycle.

On top of that, the U.S. President-elect Donald Trump is likely to adopt a more protectionist policy by intensifying export controls and raising tariffs on China's semiconductor sector. This could create more trade diversion opportunities for Malaysia under the China Plus One strategy. We believe Malaysia will remain a popular destination due to its status as a politically neutral country with a well-established ecosystem and infrastructure for the semiconductor sector.

We reiterate our OVERWEIGHT stance on the semiconductor sector. Maintain Buy recommendations on INARI (TP: RM4.10), UNISEM (TP: RM3.62), MPI (TP: RM38.20), and ELSOFT (TP: RM0.58).

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

Source: TA Research - 7 Nov 2024