PETALING JAYA: The technology sector is headed for record earnings, thanks to strong demand for semiconductors as companies recover from the Covid-19 lockdown.
Moving into the fourth quarter of 2020, Kenanga Research said semiconductors continue to enjoy strong demand, judging from the fact that eight-inch wafer foundries are experiencing orders at 20% beyond their supply capacity.
“We believe the increase in demand could be attributed to pent-up demand as companies start front loading ahead of worsening US-China tech war and a general increase in demand for consumer electronics driven by work-from-home practice, ” it said in a note yesterday.
Kenanga Research has maintained its “overweight” call on the technology sector.
The upcoming launch of iPhone 12 and the continued growth in China’s new vehicle sales are also expected to contribute to the global technology sector’s robust demand.
Commenting on the Chinese vehicle sales, which has recorded growth for the fifth consecutive month from April to August 2020, Kenanga Research believes the momentum will continue on the back of the country’s subsidy extension for new energy vehicles until end-2022.
Meanwhile, it added that the market share of electric vehicles in Europe has reached a record high of 7.2% in the second quarter of 2020 as compared to 2.4% a year earlier.
This was thanks to continuous effort from regulators to push for electrification among car manufacturers.
On the local front, Kenanga Research pointed out that the ongoing race to acquire SilTerra Malaysia Sdn Bhd, a loss-making wafer foundry owned by Khazanah Nasional, shows the elevated interest in semiconductors.
There is an ongoing bidding war among Germany’s X-FAB, Taiwan’s Foxconn, Beijing CGP Investment Co Ltd (via a 40:60 consortium with Dagang Nexchange Bhd) and Green Packet Bhd.
Kenanga Research noted that while Silterra is capable of 90 nanometer (nm) process node, this was far from the leading global players such as Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung that are already producing 5nm node.
However, the research house believes that Silterra still offers some competition in the eight-inch wafer segment, with the current condition turning into a seller’s market.
Silterra is capable of a monthly production capacity of about 46,000 wafers.
Speaking to StarBiz, Fortress Capital Asset Management CEO Thomas Yong was positive on the semiconductor-technology sector.
“In fact, we would prefer semiconductor-technology more than the glove and banking sectors.
“This is because the demand (for semiconductors) are likely to be more sustainable underpinned by development in various areas such as 5G migration in telecommunication, electric vehicles in the automobile industry, modernised manufacturing industry as well as innovation in consumer electronics, ” he said.