Semiconductor Investment in the U.S. to Accelerate
The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.
Share prices are climbing in the global semicon equipment sector in anticipation of a US executive order to resolve semicon supply shortage issues. Going forward, semicon investment in the US is to accelerate.
Executive order to prevent semicon supply shortages
According to the White House, President Biden is soon to sign an executive order to undertake a review of semicon supply chain conditions and the development of a long-term strategy to prevent semicon supply shortages. As a result, share prices of major global semicon equipment makers such as ASML, Applied Materials, and Lam Research rose 6~10% over the Lunar New Year holiday period. We note that the recent semicon supply shortage looks extreme, with the utilization rate of the global foundry industry reaching 100%.
Currently, those strongly reliant on foundries, such as Apple, Qualcomm, Sony, and AMD, are facing short supply of CPU and GPU products. Major automakers such as Volkswagen and Toyota have stopped producing some vehicles due to a lack of semiconductors such as MCUs. Although TSMC has announced that in 2021 it will invest US$28bn (increasing its capex by 62.5% y-y), the present tight supply situation is unlikely to be fundamentally resolved until 2H21. In particular, it is difficult to expand capacity at 8-inch foundries, for which the production of major equipment has mostly been discontinued.
US subsidies for semicon fab construction to rise
On Feb 11, the Semiconductor Industry Association (SIA) wrote to President Biden proposing that subsidies and tax deductions for semicon manufacturing be included in future economic stimulus plans. If this idea is adopted, government subsidies should ramp up significantly for the construction of US semicon fabs in the future.
Moving ahead, non-memory semicon investment should accelerate, which in turn should benefit global semicon equipment makers such as ASML, Applied Materials, Lam Research, and KLA, as well as related domestic firms such as SK Materials, Hanmi Semiconductor, and Park Systems. Overall, the anticipated ongoing rise in the importance of foundries looks positive for foundry industry plays such as TSMC, Samsung Electronics (SEC), and DB HiTek.