Cautious optimism for semiconductor sector

PETALING JAYA: The near–term outlook for the semiconductor sector remains cautious pending the outcome of the US government’s investigation into semiconductor imports, despite the continued growth projected for global semiconductor sales.

TA Research noted that according to Trade and Industry Minister Tengku Datuk Seri Zafrul Abdul Aziz, Malaysia’s recently concluded reciprocal trade agreement with the United States could potentially help the country secure more favourable treatment for several strategic sectors, including semiconductors.

Meanwhile, the research house expects the government to remain focused on implementing the National Semiconductor Strategy.

“In September, the global semiconductor industry sustained its upward trajectory, posting another month of robust sales growth. According to the Semiconductor Industry Association, global semiconductor sales reached US$69.5bil, up by 7% month-on-month (m-o-m), 25.1% year-on-year (y-o-y), marking the 23rd consecutive month of y-o-y growth,” the research house said.

TA Research said the increase was driven by broad-based demand across semiconductor categories, with particularly strong performance in memory and logic segments, supported by continued expansion in artificial intelligence (AI) and high-performance computing applications.

The y-o-y improvement was mainly driven by all regions except Japan (down 10.2% y-o-y). The Asia Pacific/All Other led growth (up by 47.9% y-o-y), followed by Americas (up by 30.6% y-o-y), China (up by 15% y-o-y), and Europe (up by 6% y-o-y).

“By area, September’s sales increase of 7% m-o-m was driven by growth across all regions, led by the Americas (up by 8.2%), Asia Pacific/All Other (up by 8%), China (up by 6%), Europe (up by 5.5%), and Japan (up by 1.6%),” the research house said.

According to industry association SEMI, global silicon wafer shipments are projected to rise by 5.4% y-o-y this year to 12,824 million square inches, with steady growth expected through 2028, reaching a new industry record of 15,485 million square inches. The expansion is primarily driven by strong AI-related demand, particularly from leading-edge logic devices and high-bandwidth memory.

“Meanwhile, the wafer demand for non-AI applications has begun to recover gradually from the recent industry downturn. Looking ahead, shipments are forecast to continue rising through 2028, supported by AI’s growing computational footprint across data centres and edge devices,” the research house said.

TA Research said, overall, it maintained its “neutral” stance on the semiconductor sector. The research house downgraded Inari Amertron Bhd from a “hold” to a “sell”, due to limited potential upside following a recent price rally.

TA Research maintained its “buy” call on Elsoft Research Bhd and a “hold” call on Unisem (M) Bhd and a “sell” call on Malaysian Pacific Industries Bhd.

TA Research has target prices of RM2.48, 37 sen, RM3.76 and RM27.20 for Inari, Elsoft, Unisem and Malaysian Pacific Industries, respectively.

Key downside risks include US policy that may weigh on economic growth and disrupt supply chains, weaker-than-expected sales, a weakening of the US dollar against the ringgit, and a spike in commodity prices.