Tech sector faces bleak outlook amid weak demand: DBS
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THE tide has turned for the global technology sector, from being one of the best-performing sectors in 2021 to the worst currently, said analysts at DBS Group Research in a research note on Wednesday (Jun 29).
Analysts said the bleak outlook, which comes on the back of a rising interest rate environment and the rising risk of a global recession, is likely to persist in the near term, given that the global sector has already plunged 27 per cent year to date.
Both demand and supply have been largely affected by the tech sector as there are signs of weak demand for electronic devices in recent months. Supply disruptions such as the lockdown in China have also resulted in components like display driver integrated circuits, power management integrated circuits, microcontroller units and networking chips remaining in short supply, said the analysts.
Additionally, the brokerage noted a more cautious stance in consumer demand for items such as PC/tablets as well as mobile segments, ahead of a looming recession. They are more upbeat on businesses in the server segment and expect that demand would continue to be buoyed by enterprises.
Sector valuations for the Hong Kong/China market are, however, more attractive, after an estimated drop of 30 per cent year to date, while Thailand’s sector still looks to be too expensive, wrote analysts in the report.
The analysts further believe that China’s PC and server business is likely to fare better than its mobile business, riding on a wave of strong demand from the commercial sector.
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Separately, DBS recommended several counters in the semiconductor industry that they like, noting that revenue from the area is still “way above the pre-Covid level”. Taiwan Semiconductor Manufacturing Company, AEM Holdings, UMS Holdings and Hua Hong Semiconductor were among the analysts’ top picks out of the semiconductor basket.
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