Chinese semiconductor stocks have more room to fall as demand for smartphones, PCs and EVs weakens i
Demand for chips is not recovering just yet as global electronic consumption remains depressed and electronic goods makers cut back orders to run down their inventory, analyst Ellen He JingYuan said in a report on January 11.
“The cyclical slump in China’s semiconductor sales has further to go, with chip sales volumes and prices projected to contract in the next six months,” she said. Investors should wait for a better entry point before shifting to an outright overweight stance favouring this industry, she added.
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China condemns new US law aimed at boosting domestic semiconductor manufacturing
China condemns new US law aimed at boosting domestic semiconductor manufacturing
China’s semiconductor sales plunged 21 per cent year on year to US$13.4 billion in November as economic headwinds continued to hammer global demand, according to US trade group Semiconductor Industry Association. The country’s chip imports, meanwhile, also recorded the steepest slump in nearly a year due to an ailing economy at home.Semiconductor Manufacturing International Corp, or SMIC as the nation’s biggest chip maker is known, has declined 8 per cent in Hong Kong over the past 12 months, while Hua Hong Semiconductor lost 28 per cent over the same period. An index tracking 355 mainland peers slumped 19 per cent in 2022, according to Shanghai-based data provider DZH.
China’s second-largest chip maker Hua Hong, which specialises in advanced technology, has lost more than half of its market value since reaching its peak of HK$60.25 in February 2021. Peers like Advanced Micro-Fabrication Equipment and Naura Technology Group slumped by 49 to 57 per cent since mid-2021, according to Bloomberg data.
China’s chip sales fall 21 per cent in November amid weak global demand
BCA Research recommends a relative trade of buying Chinese semiconductor stocks while shorting their global peers at the same time. It estimates China’s domestic chip demand will outstrip global demand in the long haul in 2023.
China’s major sources of demand for chips are weakening. The number of mobile phones per rural household has risen to 2.67 units in 2021, lengthening the replacement cycle to 31 months from 24 in 2019. Sales of personal computers and tablets have suffered, and growth in electric-car sales has also cooled substantially as state subsidies expired.
“Despite economic reopening, Chinese consumers will hold back spending on smartphones, personal computers and other consumer electronics over the next six months,” He wrote in the report. “The reopening will benefit primarily the service sector. It will take time for consumer confidence to recover.”
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AI chip maker ordered by US government to halt exports to China
AI chip maker ordered by US government to halt exports to China
Weak demand for consumer electronics products will continue to weigh on the chip companies through the first half of 2023, Zhao Haijun, co-CEO of SMIC said during an earnings call in November.Besides the ebbing demand, US export restrictions on China will also create “tremendous barriers” for Chinese foundries to expand their capacity in the medium term, BCA Research said. Without access to equipment for producing advanced chips, companies will not be able to get their designs made into final products and expand production, it added.BCA said investors should stay on the sidelines for global chip stocks, as consumption will not pick up as long as China’s demand remains weak. Consumer demand for electronic products in developed markets will start contracting this year as tighter monetary policies prevent an industry recovery, it added.
Additional reporting by Zhang Shidong
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