In February, the SW Semiconductor Index rose 4.92%, and the valuation is in the 3.98% quantile of nearly three years. In February 2022, the Philadelphia Semiconductor Index fell 1.54%, outperforming the NASDAQ index by 1.89 PCT, falling 13.09% since the beginning of the year, and underperforming the NASDAQ index by 0.99 PCT. Shenwan Semiconductor Index rose 4.92%, outperforming the electronics industry by 3.70pct, down 10.78% since the beginning of the year, outperforming the electronics industry by 1.55pct. From the perspective of semiconductor sub industry, all of them rose, among which the design of discrete devices and analog chips led the increase, with 11.01% and 10.26% respectively; Digital chip design and semiconductor materials rose later, with 1.83% and 3.43% respectively. As of February 28, 2022, Shenwan semiconductor PE (TTM) was 56 times, at 11.84% of the valuation in recent five years, 3.98% of the valuation in recent three years and 7.85% of the valuation in recent one year.
Semiconductor sales increased by 26.8% year-on-year, and the income of Taiwan stock chip manufacturing enterprises performed well. The growth rate of semiconductor sales was US $50.7 billion last month, a year-on-year decrease of US $2.62% compared with that in 2021; The sales volume of semiconductor equipment in Japan was 306.3 billion yen, with a year-on-year increase of 69.4% and a month on month increase of 1.0%. The year-on-year growth rate narrowed by 1.5pct compared with the previous month. The spot price of memory chips continued to rise in February, but the contract price of DRAM fell in January. Based on the monthly revenue data of Taiwan stocks, the chip manufacturing sector performed well. In January, the total revenue increased by 34.03% year-on-year, 7.75% month on month, and 1.98pct year-on-year, of which TSMC increased by 35.84% year-on-year, 10.81% month on month, and 3.45pct year-on-year; The year-on-year growth rate of chip design and sealing and testing was narrowed, and both decreased month on month.
Investment strategy: focus on wafer foundry and upstream equipment benefiting from local expansion. After 21 years of shortage and rising prices, the semiconductor industry is expected to slow down some demand in 22 years. From the monthly data, the global semiconductor sales in January decreased month on month for the first time since March 2021. From the monthly income of Taiwan stock semiconductor enterprises, only the chip manufacturing sector expanded year-on-year and continued month on month growth in January. We believe that the high base in 2021 will bring obvious pressure on the growth rate in 2022 month by month. It is suggested to pay attention to the wafer generation enterprises Semiconductor Manufacturing International Corporation(688981) , Huahong semiconductor and the equipment enterprises Naura Technology Group Co.Ltd(002371) , Advanced Micro-Fabrication Equipment Inc.China(688012) , Shanghai Wanye Enterprises Co.Ltd(600641) , As well as auto semiconductor companies with high prosperity or downstream dispersed analog chip enterprises Wingtech Technology Co.Ltd(600745) , Sg Micro Corp(300661) , Wuxi Chipown Micro-Electronics Limited(688508) , etc.
Monthly topic: Global wafer – multiple acquisitions have made it the third largest semiconductor wafer enterprise in the world. In 2020, global wafer’s revenue was NT $55.4 billion and net profit was NT $13.1 billion. Its products include epitaxial wafers, polished wafers, diffusion wafers, annealed wafers, SOI wafers, compound semiconductor materials, etc. After independence from Sino US Silicon in 2011, the company completed several acquisitions and mergers, and successfully became the third largest semiconductor silicon wafer enterprise in the world. In 2020, the company accounted for about 15% of the global market. The market value of the company was NT $337.1 billion as of December 2022. Since the acquisition of Shichuang Electronics was not approved by the German government, the company announced that it would invest NT $100 billion to expand the production of silicon wafers and third-generation semiconductor wafers from 2022 to 2024. The visibility of the company’s existing orders will reach 2024. It is expected that the production capacity will remain fully loaded in 2022 and the price will be further improved.
Risk warning: the domestic substitution process is not as expected; Downstream demand is lower than expected; Industry competition intensifies.
