● Changes in the global semiconductor sector
- So far today, the Philadelphia Semiconductor Index is up about +6% for the year. It’s on a higher return than the Nasdaq 3% gain in the same period. In 2024, the Nasdaq is up +28.6%, while the Philadelphia Semiconductor Index is up just +12.2%
- If you look at the semiconductor stocks whose growth rate has exceeded +10% this year
PHILADELPHIA SEMICONDUCTOR – ASML, Micron, Terradine, ON TO INNOVATION
Japan – Tokyo Electron
Korea (over KRW 1 trillion in market total) – SK Hynix, Hanmi Semiconductor, Eotechnics, Techwing, Park Systems, PSK Holdings
- South Korea’s semiconductors have the best returns this year on a simple weighted average basis
- Excluding both, the semiconductor sector was practically negative last year, as Nvidia and Broadcom’s contribution returns were approximately 20% out of the 12.2% return on the Philadelphia Semiconductor Index in 2024
- This year, the Philadelphia Semiconductor Index’s simple weighted average yield is similar to that of the Philadelphia Semiconductor Index. What this means is that 2024 was much more advantageous to invest in Nvidia and Broadcom than to invest in the Philadelphia Semiconductor Index, but 2025 could be different
- ASML surged in the U.S. the previous day and Tokyo Electron surged in Japan today, breaking the 100-day mark together. The two continued to fall in July last year, breaking the 100-day mark for the first time
- ASML, Applied Materials, Ram Research, Tokyo Electron, and KLA are the top five global equipment companies. Except for KLA, all of them are core equipment companies for all processes. The four process equipment companies are similarly down -30% from their peak, and KLA is in a better situation, recording -23%
- Starting in July last year, three reasons why the semiconductor sector was sluggish in the second half of the year are summarized
1) IT Device B2C Performance Demand Slows Down Legacy Semiconductor Demand
2) Momentum weakens as AI infrastructure investment growth slows
3) Trump policy uncertainty, trade dispute concerns
- To summarize the recent rebound in the semiconductor sector
1) Trump policy uncertainty sentiment eases
2) ISM Manufacturing Index bounces back
3) Microsoft beats CAPEX 2025 plan forecast
- A rebound in the ISM manufacturing index means a B2C rebound, which will have a greater impact on legacy semiconductors that are closely related to IT devices. In addition, SK Hynix’s DRAM CAPEX plan has been raised, creating an atmosphere in which traditional equipment and material stocks are seeking a rebound
- Microsoft’s CAPEX plan to invest in AI data centers in 2025 significantly raises expectations for big tech’s CAPEX plan to start in two weeks
- Of the 25 trillion won of foreigners sold to the domestic market in the second half of last year, Samsung Electronics was 22 trillion won and SK Hynix was 2 trillion won. This year, foreigners are buying a net 580 billion won, and the reason for the shift from two semiconductor stocks to buying was large
- In order for foreigners to continue buying into semiconductors, earnings estimates need to be subdued, and the biggest watershed will be Samsung Electronics’ provisional fourth-quarter earnings announcement
(This article was written before Samsung Electronics’ provisional earnings announcement on January 8)
- Samsung Electronics’ fourth-quarter operating profit consensus has fallen from mid-9 trillion won to early-7 trillion won since its third-quarter earnings report in November. Its first-quarter earnings also fell from early-9 trillion won to early-7 trillion won
- Samsung Electronics’ performance in the fourth quarter is very difficult to estimate, because it is difficult to estimate one-time costs due to the increase in performance-based pay due to the setting of provisions and the change in the performance-based system, and it is difficult to estimate the effect of currency exposure due to the sharp rise in the exchange rate in the fourth quarter. Personally, I think the number of Samsung Electronics whether its performance is good or bad does not matter and what is important is the reaction of the market
- If the market reacts well to Samsung Electronics’ performance, the global semiconductor rebound will accelerate, and if the response is not good, it will be delayed a little, but the direction of the semiconductor sector’s rebound will not change from the first half of this year
- Attention focused on a handful of AI semiconductor stocks is likely to gradually disperse due to a rebound in global manufacturing indexes and confirmation of demand for IT devices that are not worse than concerns
- In conclusion, investing in the Philadelphia Semiconductor Index is likely to perform better than the Nasdaq Composite this year, and the time is coming to look for opportunities by studying semiconductor stocks that were sluggish last year, including all-process equipment stocks
- Naturally, in this atmosphere, the possibility of Korea’s semiconductor manager being outperformed globally is increasing