The team of analysts at DBS Group Research led by Ling Lee Keng have stated in a June 22 report that the chip shortage shows no signs of abating amid strong demand.
The global chip shortage, which started in 2020 and first affected the automobile industry, has now extended to the entire tech industry. According to the analysts, the change in lifestyles has increased demand for consumer electronics.
The situation has worsened as automobiles account for only about 10% of the market share for chips while consumer electronics account for some 70% market share.
Going forward, supply is expected to improve in the coming quarters as global semiconductor producers are shifting their capacity to produce automotive chips.
Due to the strong demand and tight supply, the prices of chips and other related components are rising, while some are even out-of-stock. Impacted manufacturers are shifting to higher-end models to maximise sales or postponing new launches.
Apple has postponed component orders for the production of Macbook and iPad to the second half of the year, which led to the limited growth of the shipments for these products. These supply constraints led to a revenue impact of US$3 billion to US$4 billion ($4.03 billion to $5.38 billion) in 2QFY2021.
Samsung has also postponed the launch of the next Galaxy Note smartphone to 2022 due to the chip shortage.
Companies have to face longer waiting times for chips. To be sure, the waiting time for chips in 2HFY2019 was around 11.7 weeks, compared to the 17-week wait in April.
Chipmakers are ramping up output and increasing their capacity to meet the rising demand. The global semiconductor manufacturing capacity is expected to rise 5.7% y-o-y in 2021, followed by another 6.1% gain in 2022.
However, according to the analysts, this may not be sufficient to meet the projected 12.5% and 4.1% growth for the semiconductor market in 2021 and 2022 respectively.
Building of new fabs could take up to three years or even longer sometimes. Additionally, in existing facilities, securing equipment may be a challenge, given that equipment makers are also lacking the chips they need to make the tools.
Thus, it could take a few years for the ecosystem to address the shortage of foundry capacity. The analysts believe that the chip supply situation can improve in 1HFY2022 and should normalise by 2023.
See also: Singapore tech stocks 'cheapest' in Asean region: DBS
Semiconductor plays are the clear beneficiaries, writes the team. Within the sector, the analysts continue to like AEM, UMS, Frencken, ASM Pacific and Inari. However, to them, the fortunes of mid-to-downstream players could be somewhat mixed, depending on their customer focus and market positioning.
As at 2.56pm, shares in AEM, UMS, Frencken, ASM Pacific and Inari are trading at $3.68, $1.40, $1.72, HKD100.20 and MYR3.21 respectively.
