Morgan Stanley has responded to what it terms “strong” pushback it received from some investors after recent downgrades to Samsung Electronics Co and Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), as the shares of both technology firms slumped this week.
Analyst Shawn Kim, who lowered Samsung from “overweight” to “equal weight” on Wednesday last week while slashing the price target to 2.8 million won (US$2,577), has had to defend his call against a wide body of investors about the South Korean tech giant.
Samsung fell 5.1 percent the day of Morgan Stanley’s downgrade.
Here is a breakdown of the arguments, and Kim’s rebuttals:
“This time is different for memory chips.”
While computer chips will benefit from the long-term secular growth trend, the vast majority of global demand remains cyclical — mobile, personal computers and consumers, and history tends to repeat itself.
“Everyone knows NAND prices will fall.”
While Samsung’s flash memory business is often dismissed due to its size, it still accounts for one-fifth of the company’s profits.
Kim said revenue is more important for the chip cycle as it shows how much the market is paying for the product, and their analysis shows sales multiples are at a decade high.
In a separate report on Thursday, analysts Charlie Chan (詹家鴻) and Daniel Yen (顏志天) published their responses to their decision to lower their recommendation of TSMC from “overweight” to “equal weight” on Tuesday last week.
The stock plunged 5.33 percent this week after the downgrade.
The pair said their decision was based on “rich” valuations, while they also lowered their revenue forecasts for next year and 2019 amid shrinking chip sizes, slowing demand and rising competition.
Samsung is up 41 percent this year, touching a record on Nov. 1 to drive gains in South Korea’s benchmark KOSPI. TSMC has rallied 25 percent in the same period, achieving a record on Nov. 7.
Demand for artificial intelligence (AI) chips should spur growth for the semiconductor industry over the next few years, the CEO of a major supplier to Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) said, dismissing concerns that investors had misjudged the pace and extent of spending on AI. While the global chip market has grown about 8 percent annually over the past 20 years, AI semiconductors should grow at a much higher rate going forward, Scientech Corp (辛耘) chief executive officer Hsu Ming-chi (許明琪) told Bloomberg Television. “This booming of the AI industry has just begun,” Hsu said. “For the most prominent
Former Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman Mark Liu (劉德音) yesterday warned against the tendency to label stakeholders as either “pro-China” or “pro-US,” calling such rigid thinking a “trap” that could impede policy discussions. Liu, an adviser to the Cabinet’s Economic Development Committee, made the comments in his keynote speech at the committee’s first advisers’ meeting. Speaking in front of Premier Cho Jung-tai (卓榮泰), National Development Council (NDC) Minister Paul Liu (劉鏡清) and other officials, Liu urged the public to be wary of falling into the “trap” of categorizing people involved in discussions into either the “pro-China” or “pro-US” camp. Liu,
Minister of Economic Affairs J.W. Kuo (郭智輝) yesterday said Taiwan’s government plans to set up a business service company in Kyushu, Japan, to help Taiwanese companies operating there. “The company will follow the one-stop service model similar to the science parks we have in Taiwan,” Kuo said. “As each prefecture is providing different conditions, we will establish a new company providing services and helping Taiwanese companies swiftly settle in Japan.” Kuo did not specify the exact location of the planned company but said it would not be in Kumamoto, the Kyushu prefecture in which Taiwan Semiconductor Manufacturing Company (TSMC, 台積電) has a
China has threatened severe economic retaliation against Japan if Tokyo further restricts sales and servicing of chipmaking equipment to Chinese firms, complicating US-led efforts to cut the world’s second-largest economy off from advanced technology. Senior Chinese officials have repeatedly outlined that position in recent meetings with their Japanese counterparts, people familiar with the matter said. Toyota Motor Corp privately told officials in Tokyo that one specific fear in Japan is that Beijing could react to new semiconductor controls by cutting the country’s access to critical minerals essential for automotive production, the people said, declining to be named discussing private affairs. Toyota is among
RSS