Chipmakers in 2019: "Stay cautious, bottom not in sight" - MS

Novatek Microelectronics

19/12/2018 12:30

** "It's going to get worse before it gets better" for
chipmakers globally in 2019, says Morgan Stanley, as weaker end
demand and inventory reductions lead to lowered estimates
    ** Since August nearly every key market, except wireless
infrastructure, has taken a turn for the worse, the brokerage
says, noting a slowdown in data center and industrial,
production cuts in auto and misses in smartphones
    ** Brokerage expects chipmaker revenue to decline 4.7 pct in
2019 – vs. prior view of a 1 pct drop – driven mostly by memory
declines, i.e. a 14 pct drop in NAND and 21 pct drop in DRAM rev
    ** Also notes a lack of valuation support, saying while
sentiment is negative and stocks are well off highs, they are
still up significantly over past few years with "no signs of
capitulation" even as estimates could come down
    ** MS 'cautious' on U.S. semi stocks, and 'in line' on U.S.
semicaps; turns 'cautious' on China on smartphone weakness;
'cautious' on Korea due to worsening memory business, but stays
'in line' on Japan semis
    ** Key "overweight" US calls: Lam Research  LRCX.O , Nvidia
 NVDA.O , Xilinx  XLNX.O , Ambarella  AMBA.O , Amphenol  APH.N 
    ** Key "overweight" Asia calls: Realtek  2379.TW , Goodix
 603160.SS , ASE  3711.TW , Chipbond  6147.TWO , Toshiba
 6502.T  Hitachi High-Tech  8036.T 
    ** Key "underweight" US calls: On Semi  ON.O , Cypress Semi
 CY.O , Sensata  ST.N  and Advanced Micro Devices  AMD.O 
    ** Key "underweight" Asia calls: Hynix  000660.KS , MediaTek
 2454.TW , Win Semi  3105.TWO , Novatek  3034.TW , GigaDevice
 603986.SS , Macronix  2337.TW , Winbond  2344.TW , Micronics
Japan  6871.T  

 (Reporting by Savio D'Souza)
 ((RM:savio.dsouza.thomsonreuters.com@reuters.net))