Positive comments from an investment house boosted expectations yesterday that better times are near for the troubled semiconductor sector.
Salomon Smith Barney, an investment bank, said that "anecdotal evidence" suggests that the situation for microchips -- one of Taiwan's main exports -- couldn't get any worse, though there still is "no light at the end of tunnel."
"We are now recommending investors to accumulate shares at this level," said Andrew Lu (陸行之), head of regional semiconductor research at Salomon Smith Barney.
The company upgraded the shares of Taiwan's flagship chipmakers -- United Microelectronics Corp (聯電) and Taiwan Semiconductor Manufacturing Co (台積電) -- from "outperform" to "buy."
Anecdotal order and shipment data indicates that "a fundamental bottom" in the chip industry is only a few months away, Lu said. "This is largely due to expectations of an improvement in the inventory environment and PC sector demand in the second half of this year."
The investment house also maintained its buy recommendations for IC-packaging companies such as Advanced Semiconductor Engineering Inc (
"It is difficult to call the exact bottom," said Michael Lee, vice president and regional semiconductor analyst for Salomon Smith Barney, who tracks IC packaging shares. "But we are pretty close."
Indeed, many analysts may dispute the firm's contrarian call, Lu said, adding that these stocks may risk falling between 20 and 25 percent before climbing.
Most tech watchers believe that the nadir is somewhere near, but no major analyst has hitherto upgraded their recommendation or ratings on chip stocks.
Salomon Smith Barney also said yesterday that reduced investment in new chipmaking plants this year -- by an estimated 30 to 35 percent -- may be enough to curb chip supply relative to demand.
Yesterday's announcement in Taipei came after Jonathan Joseph, the firm's US analyst, issued "buy" ratings on companies such as memory maker Micron Technology.
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