- Global semiconductor sales recorded a third consecutive positive m-o-m increase in May
- Memory chip – DRAM and NAND expected to turnaround in 4Q23/1Q24
- We remain hopeful of a stronger 2H23 vs. 1H23, and a recovery in 2024. UMS (BUY, TP S$1.32) is our top pick for SG semiconductor
Continued recovery for semiconductor shipment data. We reiterate our view of an anticipated 2H23 recovery after the global semiconductor sales recorded a third consecutive positive m-o-m increase in May. The industry data bottoming is one of the five drivers that we highlighted earlier, to drive the recovery of the technology sector in 2H23. The other drivers are : 1) Lower inventory; 2) AI to fuel growth; 3) Green shoots from recent results release; 4) SOX as a leading indicator vs the industry is intact. Please refer to our report published on 25th Jun 23 for more details. Technology: Heading to the right side of U-shaped recovery
Global semiconductor shipments nearing a bottom
Source: SIA, CEIC; DBS Bank
Memory chips -DRAM and NAND expected to turnaround in 4Q23/1Q24. Separately, memory chips, one of the worst hit segments on the back of the weak demand, is beginning to see some light at the end of the tunnel. DRAM has been experiencing over supply (>100% of self-sufficiency level) of chips since 2022 but this is set to improve as global chipmakers begin to cut utilization rates. According to Gartner, the oversupply for DRAM is expected to last until 4Q23 and a severe undersupply in 2024 and 2025. Similar to NAND, production was also forced to reduce on the back of the weak demand from hyperscale data center customers and sluggish smartphone sales. On the back of the cut in production, inventory levels at key hyperscale and OEM customers are largely expected to return to normal in late 2023. The oversupply for NAND is expected to last till 1Q24.
Self sufficiency level for DRAM and NAND
Charts/graphics created by DBS Bank based on Gartner research.
Source: Gartner, Inc., Forecast: DRAM Market Statistics, Supply and Demand, Worldwide, 2020-2027, 2Q23 Update, Andrew Norwood, et al., 22 June 2023; Forecast: NAND Flash Market Statistics, Supply and Demand, Worldwide, 2020-2027, 2Q23 Update, Joseph Unsworth, 6 July 2023
Remain hopeful of a recovery 2H23. Overall, we remain hopeful of a stronger 2H’23 vs. 1H’23, and a recovery in 2024, with the five key drivers in place. Our top pick in the SG semiconductor space is UMS Holdings (BUY, TP S$1.32).