Source: the finishing touch of Zhongjin
Authors: Li Xuelai, Hu Jiongyi, Peng Hu,
Semiconductor is an industry with both growth and cycle, and all previous cycles have similarities and differences. The organization reviewed the global semiconductor cycle since 1978 and concluded that an average of 4-5 years experienced a semiconductor cycle. The cycle shows the characteristics of "bull long bear short" (upstream 1-3 years, downside 1-2 years). From the perspective of secondary market investment, in the upside and downside of the cycle, the SOX index usually goes through "Davis double-click" and "Davis double kill"; in the process of the cycle bottoming out, the SOX index is often 3-9 months ahead of the fundamentals; in each cycle, there are opportunities for stocks to outperform the SOX index significantly. Referring to historical data, the agency believes that 2022 is in the downward phase of the cycle, the current valuation is already at the bottom of history, and the time to lay out the next cycle may not be far away.
Since 1978, the global semiconductor has experienced seven large cycles and is currently in the eighth large cycle.In the past 20 years, the global semiconductor industry has experienced a small cycle every 4-5 years. In most cases, the semiconductor demand side has the characteristic of "continuous", and the supply side has the characteristic of "step". The relationship between supply and demand is the main factor causing the cycle. We see that the development of downstream terminals such as personal computers, feature phones and smartphones from 2000 to 2020 is the main driving force for the growth of semiconductor demand. In the future, we believe that automotive electronics, smart hardware and high-performance computing will continue to drive the growing demand for semiconductors.
Quarterly / monthly data such as semiconductor sales, memory prices, inventory levels, wafer foundry capacity utilization, semiconductor equipment sales, and wafer shipments are effective indicators for tracking the semiconductor cycle. we believe that the stage of the semiconductor cycle can be determined by cross-validation of multiple indicators. We believe that 2021 may be the peak of this cycle, and according to the law of the 2015-2019 cycle, it will take 4-6 quarters to complete the inventory digestion process.
The Philadelphia Semiconductor Index is one of the ways to invest in the semiconductor sector, which can capture the beta of the semiconductor sector.According to the law after 2010, the Philadelphia Semiconductor Index shows the characteristics of "bull long and bear short". The beginning of each upward cycle is first driven by valuation and then driven by performance. that is, the pace of investment in the Philadelphia Semiconductor Index is ahead of the fundamentals of the global semiconductor industry, usually 3-9 months ahead.
Individual stocks are another way to invest in the semiconductor sector, which can capture the alpha of the semiconductor sector.Selecting companies with technological advantages and competitive barriers at a certain stage can enable us to exceed the investment index. We see that in the latest round of semiconductor uplink cycle, the increases of AMD, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing Co Ltd and ASML are more obvious. Looking to the future, we believe that the subdivided tracks related to high-performance computing, automotive electronics and advanced process manufacturing will have high investment value.
We believe that the semiconductor industry is in the downward phase of the cycle, valuations are at the bottom of history, and the time to lay out the next cycle may not be far away.
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