Chip stocks extend gains in Asia, defying Intel’s sales warning

ASIAN semiconductor stocks rose on Friday (Jan 27), dismissing one of the worst outlooks from stalwart Intel as investors look towards an eventual recovery in the sector.

The Bloomberg Asia Pacific Semiconductors Index rose as much as 0.6 per cent, extending its recent surge to a five-month high. This was mainly due to South Korean memory chipmaker Samsung Electronics, which gained more than 1 per cent. 

“Overall the results are bad for Intel; but for the overall chip sector, we do not think it is bad,” said Daniel Yoo, head of global asset allocation at Yuanta Securities Korea. Intel’s weak forecast was due to sluggish PC demand, “which we already know”, while demand from industries including cars is strong and clouding-computing chip prices are growing.

Among Intel suppliers, package substrate maker Ibiden pared an early 3 per cent drop to less than 1 per cent. Meanwhile, Tokyo Electron erased an early gain an fell as Japan and the Netherlands were said to be poised to join the US in limiting China’s access to advanced chip-making machines.

Asian chip stocks have climbed this month as investors eye a peak in global interest rate hikes, while remaining wary of recession. Samsung shares have continued to rise even after it posted its worst profit drop in a decade. 

“The potential interpretation is that if a lot of semi companies expect the middle of the year to be the bottom, then some investors may choose weak earnings now as a good entry point,” said Mio Kato, an analyst at LightStream Research. He added that he is “sceptical” over the prospects for a V-shaped recovery.

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Intel’s own shares fell almost 1 per cent in after-hours trading following its sales forecast for the current period, which was far short of analyst estimates. The chipmaker has been hurt by sinking demand from PC customers and tough competition in the market for server hardware, though the market has been well aware.

“Overall, the optics of the 2023 outlook (including flat organic growth) are not ideal but we believe are well understood by the Street,” Michael Ciarmoli, an analyst at Truist Securities., wrote in a note.

The stock has dropped in the past six months but should “trade flat to up now that the decks have been cleared for 2023”.

Taiwan Semiconductor Manufacturing Co, the world’s largest chip foundry, warned earlier this month of weak near-term sales, but forecast slight growth for the full year on an expected recovery in demand for server chips. The Taiwan market was closed on Friday. BLOOMBERG