The content of this article is translated from CNBC, thank you.
The global chip shortage that has hit many industries has yet to be resolved. Investment bank JPMorgan Chase expects the global chip shortage to continue until 2022, but the situation may improve from the middle of the year as more supply emerges.
The continued chip shortage has affected the production of many industries, from automobiles, home appliances, personal computers to smartphones. Some analysts and investors believe that the chip shortage may continue until 2023, but JPMorgan Chase is not so pessimistic.
Gokul Hariharan, co-head of JPMorgan Chase's Asia-Pacific technology, media and telecommunications research department, pointed out that chip supply is not expected to be in short supply in 2023, but the situation in 2022 is a bit complicated. As more supply enters the market, the shortage will improve in the second half of 2022, but there will still be a shortage of supply in the first half of the year.
Hariharan said that semiconductor production capacity is gradually coming online, not only from wafer foundries, but also from IDM manufacturers. All European and American IDMs are expanding their production capacity, and many of them will be online in mid-2022.
On the other hand, JPMorgan Chase recommends that investors start paying attention to the long-term trends in the semiconductor sector, which are more structural than cyclical. Structural trends are usually long-term, permanent changes, while cyclical trends are affected by business cycles and usually return to the starting point after a few years.
At the same time, Hariharan said that JPMorgan is optimistic about two trends in the semiconductor field in the next three to five years, namely high-performance computing and mainland semiconductor companies focusing on traditional long-tail technologies, which produce mature chips for power management, microcontrollers, sensors and other consumer-related fields.
Hariharan pointed out that in the next 3 to 5 years, the high-performance computing field is expected to have double-digit growth, estimated to be between 15% and 20%. In addition, more and more companies in mainland China are targeting long-tail technologies, which means that market demand exists. Currently, most companies can only meet 5% to 10% of local demand, but the potential market may be 5 to 10 times the current level.
How are Asian semiconductors performing?
Asia's top semiconductor companies by revenue have posted double-digit annual profit growth in recent quarters, according to financial data provider Refinitiv Eikon.
Making chips amid a global supply shortage is an attractive proposition for companies.
For example, Taiwan Semiconductor Manufacturing Co. is reported to have raised prices by 10% for advanced chips, while more advanced chips - commonly used by automakers - will cost more than 20%. TSMC is the world's largest contract manufacturer of semiconductor chips. But their fortunes in the stock market have been mixed.
Shares of companies such as TSMC, MediaTek, UMC and Renesas Electronics have risen 16%-45% so far this year, while shares of Samsung Electronics and SK Hynix, the world's largest chipmakers by revenue, have fallen 13% and 6% respectively over the same period.
Hariharan explained that memory chips make up a sizable portion of Asia’s semiconductor industry, and that memory prices have been falling since early October. “The market has been expecting some declines in the segment, so it’s going through a downward cycle,” he said. “On the other hand, the market is also a little concerned about when the cycle will peak.”
Samsung and SK Hynix are both memory chip makers, and Hariharan explained that investors are generally unwilling to pay if they are concerned about whether a company can beat earnings expectations in the coming quarters.
JPMorgan expects the downturn in the memory cycle to be relatively short as industry dynamics improve compared to past, longer-lasting downturns.
*Disclaimer: This article is originally written by the author. The content of the article is the author's personal opinion. Semiconductor Industry Observer reprints it only to convey a different point of view. It does not mean that Semiconductor Industry Observer agrees or supports this point of view. If you have any objections, please contact Semiconductor Industry Observer.
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