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Wednesday, March 15, 2017

Semicon industry gearing up for a stronger year, says CIMB IB Research

Author: Tan KW | Publish date: Wed, 15 Mar 2017, 01:23 PM
By Syahirah Syed Jaafar / | March 15, 2017 : 11:14 AM MYT

KUALA LUMPUR (March 15): The Malaysian semiconductor sector revenue rose 1.4% year-on-year (y-o-y) in the fourth quarter of 2016 (4Q16), and 8% quarter on quarter (q-o-q).

This was ahead of expectations due to higher utilisation on the back of demand recovery and favourable currency movements, said CIMB Research in its note dated March 14.

“This was broadly in line with global semiconductor sales which rose 5.4% q-o-q, driven by recovery in industry demand, following inventory adjustments in 1H16.

“Key global semiconductor players are projecting 8% q-o-q sales drop in 1Q17, in line with seasonal demand weakness and a shorter operating period in the quarter,” it said.

According to CIMB Research, most independent industry research groups see stronger global semiconductor demand growth of 6% in 2017, versus 1.1% in 2016.

The research house said it expects the radio-frequency components demand to outgrow smartphone demand, due to growing requirements for more frequency bands, especially with ongoing network modernisation.

It said the increase in this demand bodes well for semiconductor companies such as Inari Ametron Bhd, Malaysian Pacific Industries Bhd (MPI) and Unisem (M) Bhd, who are contract manufacturers for Broadcom, Qorvo and Skyworks.

CIMB also said it sees automotive as the next sales growth driver, due to rising adoption of electronics in vehicles for infotainment, safety features and connectivity.

CIMB forecasts sector net profit growth of 15% in 2017 versus 9% in 2016, driven by strong earnings growth by Inari and MPI.

“Inari is on track to add new radio-frequency tester capacity and receive maiden contributions from its new divisions in 2017.
“Meanwhile, we expect MPI to benefit from the ramping up of its new automotive sensor line from 2QCY17 onwards,” it said.

It sees MPI as an exciting proxy for automotive growth, given its long experience and leading position in the segment.

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