Research firms mixed over technology sector’s prospects

by BERNAMA/ pic by TMR FILE

RESEARCH firms anticipate a rebound in the semiconductor industry this year, but cannot agree on the technology sector’s prospects due to an uncertain automotive sales outlook.

Kenanga Research, which maintains an ‘Overweight’ call on the sector, said there were potential turn-around signs for the sector given the improving outlook for both 5G connectivity and automotive segments.

It said in the third quarter of 2019 earnings season, the global top 10 outsourced semiconductor assembly and test (OSAT) players recorded aggregate revenue growth of 1% year-on-year.

However, AmInvestment Bank Bhd retains its ‘Neutral’ outlook for the sector for the next 12 months due to “near-term uncertainty in orders clouding the outlook of some semiconductor firms”.

On the other hand, it noted that smartphone sales were anticipated to grow this year, driven by demand for 5G phone models.

Kenanga Research said an upcoming flagship smartphone in September 2020 from a US company was expected to support 5G connectivity. While this may bring about more buying interest among customers, it was not expecting a huge jump in unit sales.

The research firm did not name the US company in its sector update, but there have been reports of Apple Inc planning to introduce iPhone12 this year that will have 5G compatibility.

Kenanga Research opined that the OSAT players involved in radio frequency would likely benefit more compared to those that are solely focused on smartphone sensors.

The research firm said there were encouraging signs of recovery in major automotive markets like China and Europe, and it saw D&O Green Technologies Bhd and KESM Industries Bhd as beneficiaries given their automotive-centric portfolio.