What causes the backward development of semiconductor technology?

Affected by the Sino-US trade war and concerns about oversupply in the memory sector, US technology stocks were volatile last week. It is worth mentioning that on the day of the release of Apple's new products on Wednesday, the stock prices of Apple and semiconductor stocks all showed a downward trend.

Last Wednesday (September 12), US stocks chip stocks fell collectively. One hour after the opening, the Philadelphia Semiconductor Index fell more than 3%, Micron Technology fell 6.5%; NXP Semiconductors fell 4.4%, Applied Materials, Nvidia, Broadcom and Qualcomm both fell more than 3%, Intel fell nearly 1%.

Seagate fell more than 3% on the opening, and then the decline narrowed to 1.5%; Western Digital once fell 2.3%, then rose 1.4%; Microchip Technology fell 2.3%, AMD fell 0.2% and then rose 0.8%.


Goldman Sachs issued a warning last week that supply and pricing issues plaguing memory chips and other manufacturers could deteriorate to 2019. At the same time, Goldman Sachs also lowered the stock of semiconductor equipment from “attractive” to “neutral” due to market concerns that DRAM supply will be excessive and will curb capital expenditures for semiconductor equipment in 2018-2019.

Stifel analyst Tore Svanberg believes that the potential peak in the semiconductor market has passed. He said that tariff uncertainty, below-season industry growth, and rising interest rates would hurt some highly indebted semiconductor companies.

At the same time, Horseman Global Investment Director Russell Clark also believes that the most likely short-term trend in the near future is the semiconductor stocks. Clark said that they have been paying attention to the semiconductor market in the past, especially the cutting-edge semiconductor manufacturers, and their attitude towards cryptocurrency mining. One example is Applied Materials, which has been lagging behind in recent technology developments and is not as good as expected.

So, what is the reason behind the backward development of semiconductor technology? Clark believes that the most critical factor is the sensor. The automotive industry is an important buyer of sensors, but orders from automakers have slowed, especially after China's long-term growth. Higher commodity prices are hitting the profitability of the auto industry, and sensors can be dragged down. Japanese sensor maker Renesas Electronics immediately acquired the US competitor IDT after issuing the second season profit warning. Clark believes that this is actually a market warning.