Semiconductor stocks on Friday took a beating after a grim profit warning from Idaho-based Micron Technology Inc sparked fresh worries about the US’ earnings power as the country is potentially heading for a recession.
Despite a broader stock market rally, the Philadelphia Stock Exchange Semiconductor Index dropped 3.8 percent after Micron, the largest maker of memory semiconductors in the US, flagged that demand was cooling for chips used in computers and smartphones.
The index — which is home to US chip giants Advanced Micro Devices Inc and Nvidia Corp, as well as Micron — is down 38 percent this year.
Photo courtesy of Micron Technology Taiwan Inc
Historically, semiconductor stocks have been a key barometer for the broader stock market and economy. Chips are used in a broad range of industries that are important for growth: appliances, data centers, gaming and artificial intelligence.
If conditions are weak for chips, it raises questions about demand in other segments of the economy, which is a troubling harbinger for the stock market, said Matt Maley, a senior strategist at Miller Tabak + Co.
“We had nowhere near enough chips, and now the demand is falling,” Maley said. “What signal does it send? It highlights a growing concern that the slowdown we’re going through will turn into a recession.”
The semiconductor shortage, driven by factors on the demand and supply sides, has eased somewhat, but there is still limited production for certain chips used in vehicles and home appliances. Troubling reports from semiconductor companies ahead of their second-quarter earnings are spurring fears that demand would exceed supply for even longer.
“What this weakness indicates is that the economy is slowing, and there’s potential for a recession,” said Tim Ghriskey, a senior portfolio strategist at Ingalls & Snyder LLC. “Semis are a red flag because they’re really in everything. They’re so integral to everything that’s sold today. They’re the most rudimentary equipment, so this is a major negative for the economy.”
Fears of an impending global recession and rising levels of inflation are forcing consumers and businesses to rein in spending.
Worldwide PC shipments are on pace to decline 9.5 percent this year, research firm Gartner Inc said.
“The second half of the year is off to a rather inauspicious start following downbeat commentary from Micron, which had negative implications for smartphones, data centers and overall demand for consumer discretionary goods,” said Jim Dixon, a senior equity sales trader at Mirabaud Securities. “The disappointing guidance might be the prelude to an earnings recession.”
Adding to woes was a Digitimes Asia report that the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), has seen its major clients cut their chip orders for the rest of this year.
Shares of TSMC dropped 4.73 percent on Friday and have fallen about 26.26 percent so far this year.
RECOVERED CONFIDENCE: As market rationality returns, Taiwanese stocks that have lagged behind their US peers might soon catch up, Allianz researchers said Local shares last week defied heavy pressure from China’s military drills in waters around Taiwan, and investors this week are expected to pay attention to earnings results from several tech heavyweights as well as the latest economic data on exports and GDP. The TAIEX closed at 15,036.04 points on Friday, posting a weekly increase of 0.24 percent from 15,000.07 on July 29, Taiwan Stock Exchange data showed. Over the same period, the FTSE TWSE Taiwan 50 Index, which comprises Taiwan’s top 50 stocks in terms of market capitalization, closed up 0.93 percent at 11,750.15 points, while the Formosa Stock Index, which measures
Pharmaceutical start-up AcadeMab Biomedical Inc (研生生醫) said it has been developing a COVID-19 antibody drug, an endeavor not being undertaken by many other Taiwanese pharmaceutical firms. The company was spun off from Academia Sinica’s Institute of Cellular and Organismic Biology in 2020 and has only 16 employees. It has set its sights on the innovative field of the monoclonal antibody treatment of tumors. The start-up began developing antibody drugs in January, after seeing that COVID-19 vaccines could not effectively protect people from new variants of SARS-CoV-2, AcadeMab Biomedical chief strategy officer Pearl Fong (俸清珠) said in an interview with the Taipei Times
FORECAST EXCEEDED: China’s curbs on some Taiwanese goods are unlikely to affect trade given inter-reliance in the electronics industries, a finance ministry official said Exports last month spiked 14.2 percent to US$43.32 billion, the second-highest increase on record and the 25th consecutive month of gains, driven by global demand for electronics used in high-performance computing and vehicles, the Ministry of Finance said yesterday. The ministry expects the trend to sustain this month and beyond, although the pace could slow due to inventory corrections for laptops, smartphones and other consumer electronics. “The July results proved stronger than expected despite rising fears over economic uncertainty,” Department of Statistics Director-General Beatrice Tsai (蔡美娜) said, adding that a high sales season in the West and stabilized COVID-19 infections in China
Government officials and business representatives yesterday participated in a groundbreaking ceremony at the Nanzih Technology Industrial Park (楠梓科技產業園區) in Kaohsiung, where Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) is to construct a 12-inch wafer plant. The 238-hectare park sits on the former site of a naphtha cracking plant owned by state-owned oil refiner CPC Corp, Taiwan (台灣中油). Thirty hectares of the first phase of development are reserved for TSMC’s planned factory, while the second phase is to be occupied by international semiconductor material and equipment companies, the Executive Yuan said in a statement yesterday. “The park will be connected with Tainan Science Park