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Due to the impact of the new coronavirus, JPMorgan Chase originally expected that the semiconductor market would still grow by 5% this year. Taking inventory liquidation into consideration, the latest forecast has been reduced to a decline of 6%. Excluding memory, the decline is as high as 8.4%; wafer shipment expectations remain unchanged.
JPMorgan Chase once expected that semiconductor manufacturers might face order cuts, but because the industry has not yet released any major news, the brokerage firm's latest forecast is that the originally expected order cuts may turn into inventory adjustments, especially in the second and third quarters when the adjustment pressure is very high, leading to a recession in the semiconductor market this year. For this reason, it has lowered TSMC's financial forecast for the second time and simultaneously lowered the performance of five major semiconductor manufacturers, including MediaTek, Nanya Technology, UMC and ASE Technology Holding.
JPMorgan Chase lowered the target price of TSMC from NT$335 to NT$325, MediaTek from NT$440 to NT$420, Nanya Technology from NT$105 to NT$85, ASE from NT$75 to NT$70, and UMC from NT$11. Except for UMC, which was rated "underperform", all other stocks were reiterated as "outperform".
JPMorgan Chase's technology industry research director Hagogo pointed out that the COVID-19 pandemic has led to a cooling in semiconductor demand, which was the reason why he originally judged that the industry should experience major order cuts. However, as the market order adjusts, he now believes that order cuts are likely to turn into inventory adjustments. Entering the second and third quarters, semiconductor factories should face increased pressure, especially on mid- and downstream foundries and packaging and testing factories.
Hagogu said that the wafer industry will perform poorly, causing TSMC to adjust inventory and even lose orders in the second half of the year. He currently expects TSMC's revenue in the third and fourth quarters to decline by 4% compared with the first half of the year, reversing the trend of a 30% increase in the second half of last year compared to the first half of the year.
In addition, he also expects MediaTek, Qualcomm and Huawei to reduce TSMC's 7nm orders, while Apple may adjust its 5nm orders in response to new phones. Among them, if the Huawei ban is further tightened, the orders may drop even more.
He also expects that TSMC will reduce its capital expenditure to US$13.5 billion, a 12.9% decrease, in response to the weakening momentum of advanced processes. Hagogo stressed that he is still optimistic about TSMC in the long term, but a 20% growth this year is impossible, and suggested that investors lower their expectations.
In contrast, Hagogo continues to be optimistic about MediaTek's benefits from 5G. The recent acceleration of work resumption in mainland China is conducive to MediaTek's restarting momentum. If Huawei's tight control is tightened, it will also benefit Taiwan's chip manufacturers. Therefore, MediaTek's financial forecast is revised down only based on the impact of the epidemic on mobile phone demand. As for ASE Technology Holding, it calls for attention to the possible reduction in dividends in addition to the increase in industry risks.
IDC: Global semiconductor market expected to decline by 6% year-on-year in 2020
Market research firm IDC released its latest report in early March, saying that the impact of the new coronavirus epidemic on the global economy has just begun to be taken seriously and has had a profound impact on the global technology supply chain. In this report, IDC put forward its own views on the impact of the new coronavirus on the semiconductor market and proposed several possible outcomes.
This report provides a framework to assess the market impact through four scenarios that estimate the range of possible outcomes, each based on different assumptions and severity of the impact on technology vendors' businesses. For each scenario, IDC evaluated a series of key factors and derived updated forecasts based on them, and will also provide clients with leading indicators to help them navigate this emergency.
Highlights of the report include:
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There is a nearly 80% chance that global semiconductor revenue will shrink significantly in 2020, rather than the previously expected overall slight growth of 2%;
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There is still a one in five chance of a rapid and strong rebound from the impact of the coronavirus pandemic in 2020;
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Globally, the coronavirus crisis has only just begun, and there are too many variables to immediately make a single prediction to deal with it;
For now, IDC believes that the most likely outcome of this is that the global semiconductor market revenue will fall 6% year-on-year in 2020, with a 54% probability of this happening. In this scenario, the supply chain will begin to recover in the summer, when quarantines and travel bans will be relaxed. For the global semiconductor market, the impact of this scenario will be $25.8 billion. Although the virus will have an impact for most of the year, the accumulation of virus-related knowledge, public health initiatives and other measures will mitigate the harm caused by the virus to some extent. In the short term, demand for semiconductor systems will decline and the availability of components will be somewhat affected, but as the recovery begins, the market will resume growth.
*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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