PETALING JAYA: The semiconductor sector remains in a robust upcycle after having recorded 19 consecutive months of year-on-year (y-o-y) growth.
Industry growth in the most recent five months have also been very strong at levels of above 20% y-o-y.
The Semiconductor Industry Association said that the sustained strong growth in August 2021 was driven by all regional markets and major product categories as the industry continued to increase production to meet robust demand.
Global semiconductor sales had climbed by some 29.7% y-o-y to a record high of US$47.2bil (RM197.39bil) in August 2021.
In its commentary, TA Research said it maintained its “overweight” rating on the semiconductor sector with “buy” recommendations on companies under its coverage.
These are Inari-Amertron Bhd with a target price of RM4.25 and a price-to-earnings (PE) ratio of 39 times, Unisem (M) Bhd with a target price of RM11.80 and 35 times PE, Malaysian Pacific Industries (MPI) with a target price of RM60.85 and 35 times PE, and Elsoft Research Bhd with a target price of RM1.25 and 35 times PE.
“We continue to favour outsource semiconductor assembly and test (OSAT) service providers, namely Inari, Unisem and MPI, for their strong sales pipeline and earnings growth prospects backed by their expansion plans.
“We expect them to continue benefitting from strong chip demand amid the acceleration in digitalisation and increasing embracement of emerging technologies like 5G, artificial intelligence, cloud computing, Internet of Things, and robotics during the pandemic,” TA research said.
CGS-CIMB, meanwhile, said that checks on several Malaysian OSAT companies showed they were minimally impacted from the recent energy supply disruptions in China.
“For example, we gather that Carsem Suzhou remained operational, albeit at a lower capacity of around 70% due to the energy restrictions.
“Meanwhile, Inari indicated that its manufacturing plant in Kunshan will be closed for a longer 10 days, instead of the usual eight days, during China’s National Day holidays early this month,” CGS-CIMB said.
However, it noted that this is expected to have only a minimal impact on Inari’s financials as the Kunshan plant’s contribution to its sales is small.