![]() But technological advances are getting expensive. The probability of M&A being approved by Chinese regulators is now higher-good news for these transactions to close. We weren’t out of the woods yet on Covid-19, and that was novel. Three, stock prices moved up considerably in the past 12 months. Two, China is clearly looking to build its own domestic semiconductor industry and, looking out five to 15 years, will be a viable threat. Scarcity value, despite the uncertainty around Covid-19, has played a role in the willingness to pursue M&A. One, there are only so many remaining high-quality assets. , with planned higher corporate-tax rates favoring foreign-domiciled chip makers like Under a Biden administration, the big winners are equipment suppliers like I would hope this is a mission-critical focus by the new administration. This is a wonderful industry for the U.S., and we need our government to support it, like all the other foreign governments do. It’s in the Senate Appropriations Committee.Ĭhina wants to build their own semiconductor industry. semiconductor manufacturing will be a huge focal point. Finally, the Chips Act to fund local U.S. That would be removed as a concern.Ī stimulus package would be good for GDP and therefore semiconductor growth. Semiconductor Manufacturing International The market was concerned that the restrictions on shipping equipment to But it does mean China offering regulatory approval of merger-and-acquisition transactions. There will be pressure for China to improve on intellectual-property theft and other concerns. U.S.-China relations will be less transactional and normalize a bit. and the election definitely led to the SOXX going dramatically higher. The election had a big impact on my group. What does Joe Biden’s assumed presidential victory mean for China trade and semiconductors? You’ll see relative outperformance because of how critical semiconductors are. At the same time, businesses and individuals have accelerated their adoption of the digital world. Is a second wave of the virus of concern?Īnother wave and/or a slowdown in a reopening of economies would be a negative. Covid-19 has exacerbated the digitalization going on across almost every industrial vertical. #STELLAR IPHI DRIVERS#A number of drivers should enable continued relative outperformance. Those three drivers are what’s going to enable and add growth in ’21. The third leg of the stool is broad-based analog, with auto and industrial recovering after seven straight quarters of undershipping. If I think about secular growth for the cloud, and smartphone units tracking down 10%-plus this year, and then going into the 5G cycle, I don’t know why smartphones can’t grow 10% to 15% in 2021. Not only will that lead to greater smartphone units, but there’s also an underlying content story. Driving accelerated growth in 2021 and beyond is, first and foremost, the secular story with the cloud. The consensus estimate for next year is below that. Our base case is semiconductor revenue growth of 5% this year and 10% or even higher next year. This year, semiconductor revenues are probably up 5%, which is pretty amazing in light of the high correlation with global gross domestic product. That gave us confidence that the impact to semiconductor fundamentals would be muted. In this cycle, we were 20% off the prior peak. During the global financial crisis, revenues for the industry dropped 40% from peak to trough, and then, within three to four quarters, were back to peak. Muse: One of the most important factors to recognize, coming into 2020 and the pandemic, is that much of the semiconductor industry had corrected in the latter part of 2018 and all of 2019. He resides in New York City, where he plays tennis and takes care of his new dog when he isn’t tracking the semiconductor industry. Muse does his job well: He’s the top-ranked semiconductor analyst in Institutional Investor’s annual survey. at Columbia University, Muse worked as an investment banker at Lehman Brothers before becoming an equity-research analyst in 2000, first at Lehman Brothers, then at Barclays, and since 2014, at Evercore ISI. Muse, 50, Evercore ISI’s widely followed chip analyst, to see what happens next. ![]()
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