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6 September 2013

JULY 2013


MIDF EQUITY BEAT

KDN: PP 10744/06/2012

Friday, 06 September 2013

06 September 2013 | Semiconductor Industry Update Maintain NEUTRAL

Sales broke the psychological USD25b level

But lower BTB suggests subdued growth going forward

REVIEW OF WORLDWIDE SEMICONDUCTOR SALES – JULY 2013

• Global sales semiconductor (GSS) for the month of July showed a positive climb, breaking the psychological

USD25b level. Sales continued to trend upwards by 2.6%mom and 5.1%yoy to USD25.5b supported by growth

from all regions.

• Sales from the American region increase by 5.4%mom and 21.5%yoy to USD5b, a level last seen in November

2012.

• Meanwhile, Japan reversed its sales downtrend, recording an increase of 7.9%mom. Despite the sequential rise, it

was still lower than last year’s sales at -18.6%yoy due to the devaluation of Japanese Yen.

• For the month under review, Europe may have just commenced its recovery phase. Sales in the region inched up

by 0.3%mom and 1.1%yoy to USD2.85b.

• The Asia-Pacific region showed a modest sequential growth of 1.2%mom to USD14.7m. On year-on-year basis, it

was up by 7.2%.

• For 2013, WSTS maintained its sales growth projection of 2.1%yoy at USD297.8b, which is slightly above MIDFR

estimate of 1.7%yoy. Memory and sensor are expected to be the main growth drivers.

• We reiterate our NEUTRAL outlook on the industry. Despite semiconductor sales expansion from February to July

2013, we view that the sales growth quantum has yet to warrant an upgrade. In addition, the latest BTB ratio also

showed a slight weakening in the demand for semiconductor equipment. A slowing demand for semiconductor

equipment could be an early sign that semiconductor demand growth may be abating moving forward.

Source: SIA, WSTS

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MIDF EQUITY BEAT

Friday, 06 September 2013

Source: SIA, WSTS

WSTS 2013-2015 SEMICONDUCTOR SALES FORECAST

By Region

Spring 2013

Amounts (USD'm) Year on year growth (%)

2012 2013E 2014F 2015F 2012 2013 2014 2015

Americas 54,359 55,225 57,115 58,526 -1.5 1.6 3.4 2.5

Europe 33,163 34,905 36,304 37,393 -11.3 5.3 4 3

Japan 41,056 35,402 36,772 37,591 -4.3 -13.8 3.9 2.2

Asia Pacific 162,985 172,234 182,716 191,393 -0.6 5.7 6.1 4.7

Total World 291,562 297,766 312,906 324,903 -2.7 2.1 5.1 3.8

By Products

Discrete Semiconductors 19,138 18,136 19,211 19,996 -10.5 -5.2 5.9 4.1

Optoelectronics 26,175 27,052 29,098 30,670 13.4 3.3 7.6 5.4

Sensors 8,009 8,372 8,970 9,467 0.5 4.5 7.1 5.5

Integrated Circuits 238,240 244,206 255,628 264,771 -3.6 2.5 4.7 3.6

Analog 39,303 40,125 42,300 44,129 -7.2 2.1 5.4 4.3

Micro 60,238 58,474 960,488 62,476 -7.6 -2.9 3.4 3.3

Logic 81,703 85,248 90,658 94,220 3.7 4.3 6.3 3.9

Memory 56,995 60,360 62,182 63,946 -6.2 5.9 3 2.8

Total Products 291,562 297,766 312,906 324,903 -2.7 2.1 5.1 3.8

Source: SIA, WSTS

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MIDF EQUITY BEAT

Friday, 06 September 2013

THE BOOK-TO-BILL (BTB) RATIO

• For the entire first half of this year, BTB ratio has been hovering at 1.1x levels. Nonetheless, the BTB ratio

experienced a distinct drop to 1.0x in July 2013.

• Bookings came in at USD1.3b, similar to that of billings. A slowing demand for semiconductor equipment could be

an early sign suggesting that semiconductor demand growth may be abating moving forward.

• Trend-wise, billings continued to improve. The ratio has been at or above parity for the past seven months.

Source: SEMI

SECTOR REVIEW & COMMENTS

In 2Q13: Tablet sales were up, desktop and notebook were down.

• The PC market remained flat in the second quarter, according to Canalys.

• Despite a 43% increase in tablet shipments, these gains were offset by poorly performing traditional desktops and

notebook sales, which fell by more than 7% and 14% respectively.

• Canalys says that by 4Q13, where December holiday sales of electronics are typically higher, tablet will likely to

outsell notebook for the first time.

• Figures show that in the European, Middle Eastern and African markets, PC shipments fell by 3%yoy in the

second quarter. Western Europe continued to pose difficulties for PC makers, which have seen declines in sales

of circa 10% per annum in countries like the U.K., France, and Germany.

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MIDF EQUITY BEAT

Friday, 06 September 2013

• Meanwhile, the Asia-Pacific region saw only a 0.5%yoy decline, suggesting a relatively healthier albeit softening

market. A slump in China’s shipments, which accounted for nearly half of the region's shipments, saw the brunt of

the region's slowdown.

• We reiterate our stand that tablet will continue to chart the highest growth, vis-à-vis desktop and notebook, given

its functionality.

• Thus, we have a positive bias towards semiconductor companies with exposures to the tablet segment.

Worldwide total client PC shipments - Market shares Q2 2013, Q2 2012

Vendor Q2 2013 shipments % share

Q2 2012

shipments

% share

Growth

Q2'13/Q2'12

Total 109,007,450 100% 108,708,770 100% 0.3%

Apple 18,631,330 17.1% 21,061,430 19.3% -11.5%

Lenovo 14,114,820 12.9% 13,154,560 12.1% 7.3%

HP 12,697,680 11.6% 13,554,340 12.4% -6.3%

Samsung 10,818,920 9.9% 5,246,360 4.8% 106.2%

Dell 9,454,770 8.7% 9,652,310 8.9% -2.0%

Others 43,289,930 39.7% 46,039,770 42.2% -6.0%

Source: Canalys

IT hiring strongest since June 1998

• The unemployment rate among technology professionals fell to 3.8% in July 2013, from 4.2% a month earlier.

• In the month of July 2013, 3,600 jobs were created in data processing, hosting and related events, according to

the latest Bureau of Labor Statistics (BLS) report. That was the largest single month of job growth in this category

since June 1998.

• While the BLS numbers did not dissect the IT jobs in terms of specialty, nonetheless, Dice.com says its own

numbers showed highest growth in the "cloud" category.

• Market is perturbed that the rise of cloud computing means trouble for IT career prospects. But so far, interest in

cloud from enterprises has been helping to fuel a job boom.

Source: Dice.com

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MIDF EQUITY BEAT

Friday, 06 September 2013

Microsoft to acquire Nokia's devices and services unit for USD7.2b

• The purchase involves Nokia’s phone-making unit and its patents. Microsoft will spend USD5b on the phonemaking

unit and USD2.2b on licensing Nokia’s patents.

• This will leave the Finnish phone maker with networking, mapping, location and other technologies.

• The rationale behind the deal is to accelerate Microsoft’s phone market share as well as to secure the Windows

Phone ecosystm. Note that Nokia is the dominant Windows Phone manufacturer and distributor.

• With the acquisition, the market could be expecting more Windows-based phone to flood the market. This will

further intensify competition with the likes of iOS and Android.

CONCLUSIONS

• GSS for the month of July 2013 showed a positive climb, increasing 2.6%mom and 5.1%yoy to above USD25b.

All regions showed better sales momentum.

• However, lower BTB on semiconductor equipment is a signal that semiconductor demand growth may be abating

going forward. The ratio was down to 1.0x from 1.1x previously. In terms of absolute figure, booking was below

USD1.3b.

• We maintain NEUTRAL on the sector outlook, attaching a 1.7%yoy semiconductor grow projection for 2013. This

is slightly shy of WSTS growth projection of 2.1%yoy. While GSS continues to show upward momentum in sales,

the BTB is signalling some weakenesses in demand going forward.

• This could translates into possible resistance in terms of sales growth for the next few months. Hence, we are of

the view that GSS will trend sideways in the near term.

Selected Semiconductor Stock

Stocks

Recomd’n

Price @ 5

September

2013 (RM)

Target

Price

(RM)

EPS (sen)

EPS (%

change)

PER DPS (sen) Yield (%)

12 13F 12 13F 12 13F 12 13F 12 13F

UNISEM SELL 0.91 0.62 -4.8 1.3


MIDF EQUITY BEAT

Friday, 06 September 2013

MIDF RESEARCH is part of MIDF Amanah Investment Bank Berhad (23878 - X).

(Bank Pelaburan)

(A Participating Organisation of Bursa Malaysia Securities Berhad)

DISCLOSURES AND DISCLAIMER

This report has been prepared by MIDF AMANAH INVESTMENT BANK BERHAD (23878-X). It is for

distribution only under such circumstances as may be permitted by applicable law.

Readers should be fully aware that this report is for information purposes only. The opinions contained

in this report are based on information obtained or derived from sources that we believe are reliable.

MIDF AMANAH INVESTMENT BANK BERHAD makes no representation or warranty, expressed or

implied, as to the accuracy, completeness or reliability of the information contained therein and it should

not be relied upon as such.

This report is not, and should not be construed as, an offer to buy or sell any securities or other financial

instruments. The analysis contained herein is based on numerous assumptions. Different assumptions

could result in materially different results. All opinions and estimates are subject to change without

notice. The research analysts will initiate, update and cease coverage solely at the discretion of MIDF

AMANAH INVESTMENT BANK BERHAD.

The directors, employees and representatives of MIDF AMANAH INVESTMENT BANK BERHAD may

have interest in any of the securities mentioned and may benefit from the information herein. Members

of the MIDF Group and their affiliates may provide services to any company and affiliates of such

companies whose securities are mentioned herein This document may not be reproduced, distributed or

published in any form or for any purpose.

MIDF AMANAH INVESTMENT BANK : GUIDE TO RECOMMENDATIONS

STOCK RECOMMENDATIONS

BUY

TRADING BUY

NEUTRAL

SELL

Total return is expected to be >15% over the next 12 months.

Stock price is expected to rise by >15% within 3-months after a Trading Buy rating has been

assigned due to positive newsflow.

Total return is expected to be between -15% and +15% over the next 12 months.

Total return is expected to be 15% within 3-months after a Trading Sell rating has been

assigned due to negative newsflow.

SECTOR RECOMMENDATIONS

POSITIVE

NEUTRAL

NEGATIVE

The sector is expected to outperform the overall market over the next 12 months.

The sector is to perform in line with the overall market over the next 12 months.

The sector is expected to underperform the overall market over the next 12 months.

7

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