Chip Stocks Are Back on the Menu
By Paul Vigna
Apple Inc.'s new iPhone, sure to be a welcome present for kids
and parents this holiday season, also could potentially be a gift
for semiconductor stocks too.
Revenue and billings at two key companies, Taiwan Semiconductor
Manufacturing Co. and United Microelectronics Corp., appear to have
turned a corner in the past few months. That may in turn end up
being a signal to the entire industry.
While the Philadelphia Semiconductor Index is up 12% from a year
ago, a number of stocks haven't fared as well. ADRs of Taiwan
Semiconductor have dropped 1.3% over the past 12 months, while ADRs
of United Micro are off 16%, shares of Nvidia Corp. are down 35%
and Advanced Micro Devices Inc. has fallen 8.7%.
Semiconductor chips are a staple, in everything from teddy bears
to the International Space Station. But the industry is still tied
to economic winds. Chip makers have been struggling with the crash
of the cryptocurrency sector in 2018, a weak global economy and the
Trump-sparked trade war between the U.S. and China.
Through July, global semiconductor sales were down 16% from a
year ago, according to the Semiconductor Industry Association.
While orders related to the new iPhone are an obvious boon for
the industry, they may also be a sign that a long downturn in chip
orders may be bottoming out, said Andrew Zatlin, an independent
analyst who runs a firm called SouthBay Research in San Mateo,
In a July conference call, United Micro projected that wafer
shipments in the third quarter would rise 2% to 4%. Taiwan
Semiconductor, in its July conference call, projected that
sequentially, third quarter revenue would rise 18%.
Part of that is because of Apple's latest iPhone, and the
upcoming holiday season. "But that is soaking up excess inventory,"
Mr. Zatlin said. Because chip inventories across the industry tend
to be lean to begin with, if existing inventory is being used on
the iPhone, more chips will be needed for everything else.
United Micro and Taiwan Semiconductor are "great" barometers of
demand, Mr. Zatlin said. The kinds of chips they make,
microprocessors, aren't variable, like, for example, memory chips.
Microprocessors go into every device, so if orders for
microprocessors are rising, sales of devices must be, too.
"A bottom has been reached and demand is set to rise," he said,
something that will likely show up in the global supply chain in
the first quarter of next year.
Write to Paul Vigna at email@example.com
(END) Dow Jones Newswires
September 24, 2019 16:13 ET (20:13 GMT)
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