Credit Suisse analysts optimistic about semiconductor outlook

By Ko Lin

Despite a challenging year for the tech sector, the Taiwan Stock Exchange (TWSE) is nevertheless optimistic about the growth potential of its listed high-tech companies, according to TWSE President Michael Lin during the annual Asian Technology Conference (ATC) held in Taipei on Wednesday.

“In the first half of this year, net income before tax for high-tech firms has grown by 15 percent as compared to 2014,” he said, adding that the dividend yield for TWSE-listed tech firms is up 4.71 percent as of end August, making it one of the highest in the world.

As one of the largest tech-focused investment conferences in the region, the event brought together attendees spanning across major foundries, back-end and fables companies, ODMs, TFT/touch, mobile, and equipment manufacturers from Greater China.

Speaking on the sluggish semiconductor demand this year, Credit Suisse AG’s Manish Nigam, head of Asia Technology Research, said the disappointment is primarily attributed to currency-led shortfall and weakness in emerging markets for consumer tech demands across PCs, tablets, smartphones, and TVs.

“This has resulted in the semiconductor inventory near historical highs due to the build-up brought in from 2014,” he explained.

Randy Abrams, Credit Suisse head of equities research in Taiwan, said early customer aggression to build on optimistic projects in 1Q15 coupled with slowdown on demand have also resulted in high inventory build-up.

 “Although we are conservative about the remaining quarters of this year, we are cautiously optimistic in 2016 as excess inventory clears and tech demand stays at least moderate with support from new applications, including wearables, automotive electronics, and devices under the broader Internet-of-Things umbrella,” Abrams said.

The Credit Suisse analyst said he expects the excessive semiconductor inventory to clear by Chinese New Year and through the first quarter, however suggesting that more mergers and consolidation next year could be hugely beneficial for suppliers in Taiwan.

The 16th annual ATC is a three-day event that will be held through September 11. Almost 100 companies will be present at the conference to institutional investors from around the world.



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