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by Klaus Schachinger, Euro am Sonntag
M.Maximum capacity utilization: A few days ago, the world’s largest contract manufacturer for computer chips, Taiwan Semiconductor Manufacturing (TSMC), surprised with a significant increase in its investments. With 25 to 28 billion dollars, at least 50 percent more than 2020, the technologically leading group wants to build additional capacities. Numerous chip developers order from TSMC.
Industry experts see the increased investments as an indication of sustained high demand in many segments of the global semiconductor market. Even the former production leader Intel, which has got into dire straits, now wants to secure capacities at TSMC in good time. According to reports from the business press in Taiwan, Intel intends to increase the production of its microprocessors, which are used in laptops and tablets, by 30 percent and place all external orders with TSMC. Christopher Danely, an analyst at US bank Citigroup, expects the tech giant from Santa Clara, California, to have laptop chips with comparatively low margins manufactured entirely by TSMC in the future. According to Danely’s estimates, they provide 15 percent of Intel’s $ 75 billion in annual sales. Outsourcing manufacturing would add $ 2.9 billion in sales to TSMC.
Pandemic boosts notebook market
The sharp increase in working and learning from home via computer, notebook or tablet is causing the chip industry to make a comeback. According to figures from market researcher Canalysis, the number of PCs and mobile computers delivered worldwide rose by eleven percent to 279 million units last year. Notebooks, ideal for mobile working and learning, achieved a new record with a share of 79 percent. The overall market, which had grown again for the first time in a long time since 2019, has now accelerated its growth significantly.
Meanwhile, the company’s former technology boss, Pat Gelsiger, is reassuring the employees and shareholders of Intel. He will take over the management from February. Investors and analysts trust the savvy Intel expert to lead the giant back on the road to success in the medium term.
The price of the favorably valued share increased significantly and has been up 19 percent since the beginning of the year. That is twice as much as the Philadelphia Semiconductor Index rose. Big trends in the industry ensure good long-term prospects: more computing power in the data centers for cloud computing, the 5G mobile communications standard, chips for the new generation of game consoles, semiconductors for cars with alternative drives, sensors and chips for driver assistance systems, and in a few years too for self-driving cars as well as the digitalization industrial production.
Things are getting tight at the car manufacturers
The chip industry is coping with the direct effects of the pandemic better than expected. Many employees in the company switched to the home office without any problems. The production is highly automated. Many semiconductors are manufactured in so-called clean rooms, where the smallest particles, including viruses, are filtered out of the air. However, the high utilization of global capacities with chips for computers, cell phones and game consoles is currently surprisingly at the expense of deliveries to the automotive industry.
There is a lack of capacities, and the reserves of the car companies and suppliers are too low. As a result, companies like Bosch and Continental around the world are experiencing bottlenecks in chip deliveries and are forcing car companies to cut back their production considerably in some plants. VW, for example, was unable to build 50,000 cars in China in December.
The chip manufacturers reacted too late to the recovery in the automotive industry, which was badly affected by the pandemic. The business came back faster than expected. Some customers would have ordered too late. In some areas you can no longer keep up with the deliveries, recently reported the boss of NXP Semiconductors, Kurt Sievers. The American-Dutch group is the second largest supplier of car chips.
The Munich-based company Infineon, which moved up to first place in Autochips with the purchase of the US company Cypress Semiconductor, is now increasing its capacities in order to cope with demand.
Although large developers of chips for the automotive industry such as Infineon, NXP and Texas Instruments (TI) outsource parts of their production, most of them still manufacture in their own factories, so-called fabs. Some of the current bottlenecks should therefore be resolved soon.
The big three will present details on this with their quarterly balance sheets at the end of January and beginning of February. With around 45 percent, Infineon generates the largest share of estimated 10.7 billion euros in sales for the fiscal year (up to the end of September) in the automotive industry.
A spokeswoman for the group said on request that the situation in the supply chain for the automotive industry is being monitored very closely. The plans for 2021 took into account a “certain growth in automobile production”. Electromobility remains a main driver of growth.
The DAX group has increased investments for 2021 to 1.4 to 1.5 billion euros, in 2020 it was 1.1 billion euros. In Villach, Austria, the production of power semiconductors on large wafers is now being ramped up. With these chips, which regulate tensions, Bayern are by far the world market leader. With its own technology for manufacturing the chips on large silicon wafers, Infineon manufactures cheaper than the competition because of the large quantities.
The acquisition of the US company Cypress will have its full effect in the current financial year. He strengthens Infineon in the largest division of car chips. There, the Bavarians benefit from alternative drives, driver assistance systems and later from self-driving cars. Cypress complements Infineon in many areas. Thus, higher margins are possible with chip systems. For 2021, analysts expect 25 percent more sales, around 10.7 billion euros, and 55 percent more earnings per share.
With the return of Pat Gelsiger from the specialist for virtualization software in data centers, VM Ware, Intel is getting a boss who enjoys a lot of trust among employees and who is very familiar with software and hardware. Good prerequisites for solving Intel’s complex problems in production and for establishing the giant with technology for self-driving cars through subsidiary Mobileye. The share is valued cheaply.
With the ETF, investors can invest in the upward trend in the chip industry: The top ten include contract manufacturers TSMC, Intel, mobile communications chip leader Qualcomm, chip lithography world champion ASML, Texas Instruments, Nvidia, leading developer of chips for video games and artificial intelligence (AI), Micron, US developer of memory chips, as well as the largest equipment supplier Applied Materials. The top ten represent three quarters of the investment volume.
More news about Intel Corp.
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