Allianz Global Investors is predicting that a resurgence in demand for semiconductors in the second half of this year is likely to drive a long-anticipated revival of the global chip sector.
Chip industry sales could hit bottom in the second quarter before a recovery happens, said Benson Pan (潘育憲), who manages the firm’s NT$24.7 billion (US$809.09 million) Taiwan Technology Fund.
Pan said he added investments in Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) and other Taiwan chip companies in the fourth quarter of last year.
Photo: Ritchie B. Tongo, EPA-EFE
“My positioning strategy is based on a clear direction that the semiconductor industry is heading toward a cyclical recovery,” Pan said in an interview.
“The chip industry tends to be overly pessimistic on outlook when it is going through a down-cycle,” he said.
Global demand for chips remains weak as soaring inflation, rising interest rates and concerns of a potential global recession dampen consumer spending on computers and smartphones.
However, chip stocks have beaten the broader market this year, with the Philadelphia Semiconductor Index gaining 22 percent versus a 7 percent advance for the S&P 500 Index.
Pan said he expects semiconductor stocks to rebound in one or two quarters before a turnaround in chip sales occurs.
Now is a good time to add exposure, he added.
Pan’s outlook puts him at odds with Warren Buffett, whose Berkshire Hathaway Inc dumped 86 percent of its TSMC American depository receipts (ADRs) late last year, a move that startled the market and triggered more selling of TSMC shares.
TSMC in January cut its spending plan for this year on expectations that demand could be “softer than previously prognosticated,” and signaled that the company might face its first quarterly decline in revenue in four years.
TCMC stock is up 18 percent this year, compared with a 12 percent gain for the benchmark TAIEX.
Pan said he expects TSMC’s full-year results to remain flat or to contract slightly, although he remains bullish on the chipmaker’s outlook over a two-year span.
The firm has maintained its solid market share, despite challenges including a planned overseas expansion and a US crackdown on chip exports to China, he said.
“I am not too worried about the current weary chip demand, as it’s obvious that long-term usage of semiconductors will grow substantially,” Pan said.
Applications for advanced chips is expanding far beyond traditional consumer goods to servers, automobiles and artificial intelligence, Pan said, adding that “this demand will eventually feed back to TSMC and other Taiwan suppliers.”
Escalating tensions between the US and China and fears of a global economic slowdown drove foreign investors to pull cash from Taiwanese stocks last year, the first net outflow since 2019. That trend has since reversed, with the Taiwan Stock Exchange recording NT$12 billion of inflows in the first quarter, the most in Asia excluding China.
“The worst is over” for cross-strait tensions as China reopens and focuses on boosting its economy, which should help Taiwan’s tech companies attract more overseas money, he said.
Pan said he plans to maintain the portfolio’s focus on the chip sector.
His top three positions are eMemory Technology Inc, TSMC and United Microelectronics Corp (聯電), he said.
Allianz’s Taiwan Technology Fund is up 22 percent this year after an 11 percent loss over the past 12 months, data compiled by Bloomberg showed.
Pan said the past year was “especially challenging” because of unprecedented macro surprises such as Russia’s war in Ukraine and aggressive interest-rate increases by the US Federal Reserve.
PRICE HIKES: The war in the Middle East would not significantly disrupt supply in the short term, but semiconductor companies are facing price surges for materials Taiwan’s semiconductor companies are not facing imminent supply disruptions of essential chemicals or raw materials due to the war in the Middle East, but surges in material costs loom large, industry association SEMI Taiwan said yesterday. The association’s comments came amid growing concerns that supplies of helium and other key raw materials used in semiconductor production could become a choke point after Qatar shut down its liquefied natural gas (LNG) production and helium output earlier this month due to the conflict. Qatar is the second-largest LNG supplier in the world and accounts for about 33 percent of global helium output. Helium is
DOMESTIC COMPONENT: Huang identified several Taiwanese partners to be a key part of Nvidia’s Vera Rubin supply chain, including Asustek, Hon Hai and Wistron Nvidia Corp chief executive officer Jensen Huang (黃仁勳), addressing crowds at the company’s biggest annual event, unveiled a variety of new products while predicting that its flagship artificial intelligence (AI) processors would help generate US$1 trillion in sales through next year. During a two-and-a-half-hour keynote address, Huang announced plans to push deeper into central processing units (CPUs) — Intel Corp’s home turf — and introduced semiconductors made with technology acquired from start-up Groq Inc. The company even said it was developing chips for data centers in outer space. At the heart of Huang’s speech was the message that demand for computing power
OPTIMISTIC: Inflation still has a chance of remaining below the central bank’s 2 percent alert level, as Taiwan’s economy is resilient with healthy exports, the NDC minister said Taiwan’s inflation could exceed 2 percent this year if oil prices continue to surge amid escalating tensions in the Middle East, prompting the government to reassess its economic outlook, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. DGBAS Minister Chen Shu-tzu (陳淑姿) told lawmakers at a meeting of the legislature’s Finance Committee that the agency’s earlier growth forecast of 1.68 percent in the consumer price index (CPI) and 7.71 percent for GDP this year did not account for the ongoing Middle East conflict and would need revision, if tensions persist. The previous forecast assumed an average international crude price of
ELECTRIC DREAMS: Smart cities would use ‘virtual power plants,’ which integrate idle electricity use from households, businesses and factories, Asustek said Asustek Computer Inc (華碩) yesterday showcased key components of its artificial intelligence (AI)-driven smart city initiatives at a trade show in Taipei, eyeing new business opportunities as cities develop sovereign AI infrastructure. Advances in generative, multimodal and physical AI are driving cities toward a new phase of “sovereign AI,” Asustek cochief executive officer Samson Hu (胡書賓) told reporters on the sidelines of the Smart City Summit and Expo at Taipei Nangang Exhibition Center’s Hall 2. The company showcased its “AI City” framework, which comprises three layers — computing infrastructure centered on AI servers, AI models and a platform layer for data processing
RSS