There is no sign of weakness on chips. In the short-term, shortages are still acute with Chinese lockdowns. Breaking tech companies CEO comments and data during earnings call are painting a very bullish case. The only problem is not on demand but supply. In a catch-22 situation, some equipment manufacturers are themselves suffering from chip shortages.
Pat Gelsinger, Intel new CEO that has engaged the company into a major repositioning in manufacturing and execution revised Q2 guidance slightly due to soft demand in low-end PC but maintains the bullish FY guidance and continues to think that “we are just at the beginning of a long-term growth cycle across semiconductors”.
Peter Wennink, the CEO of ASML the world largest semiconductor equipment maker says that he continues to see “unprecedent customer demand across all market segments”. ASML is running at full capacity and expect demand to exceed supply well into next year.
TSMC is the largest semiconductor manufacturing company in the world. TSMC CEO CC Wei indicated that 2022 will be another strong growth year for TSMC and expects full year growth to likely be at or exceed the high end of our guidance range of mid- to high 20s percent in U.S. dollar terms. Softness is cell phones and PCs is largely offset by the “multi-year megatrend” in High Performance Computing and 5G. He sees tight capacity throughout 2022 a very good leading indicator for TSMC pricing power and margins that mostly relies on capacity utilization rate.
Technology stock have gone through a severe correction in 2022. The strong fundamental story has not changed. Unlike other segments of technology, chip stocks and SPEs were not overpriced in January. Many blue chip stocks now trade on PE well below 20x, which sounds attractive related to a 20-30% growth potential in 2022 and 2023 string demand and tightness in inventory and capacity.
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