Insights into the current semiconductor situation
On June 6, Bank of America Merrill Lynch held its Global Technology Conference, wherein senior officials from many chip companies discussed the potential impact of the US-China trade war and what lies ahead for them in the second half of 2019.
Overall semiconductor industry momentum is weak
According to the chip makers, they’ve succeeded in avoiding or mitigating tariffs by making adjustments to their supply chains. However, the slowdown in end-consumer demand and the US ban on Huawei will likely affect their earnings in 2019. There are no signs of any negotiations happening between the US and China anytime soon, indicating that demand in the second half could remain subdued.
For instance, Western Digital stated that negative-AND prices could continue to fall, and the Huawei ban could change the composition of revenue coming from the smartphone market. Semiconductor manufacturing equipment supplier Lam Research stated that despite the current production cuts, it would take the memory market the whole of 2019 to balance supply and demand.
Company-specific drivers emerge despite industry downturn
Bank of America Merrill Lynch analyst Vivek Arya stated that while overall semiconductor momentum remains weak, there could be value in some stocks that have company-specific drivers. One such stock is AMD, which is growing even in the downturn. The company’s main growth driver is its 7-nanometer product launches, which will help it gain market share from rivals Intel and NVIDIA.
After AMD’s product announcements, other Wall Street analysts, including Wells Fargo’s Aaron Rakers and Morgan Stanley’s Joseph Moore, wrote positive comments about the company. Moore raised the stock’s price target from $17 to $28.