KUALA LUMPUR – AllianceDBS Research expects sluggish technology industry growth in 2019, especially in the first half of the year (1H19), exacerbated by inventory adjustment for the supply chain as iPhone sales in Malaysia disappoint.
It said the World Semiconductor Trade Statistics organisation in its November update had maintained its estimated global semi sales growth of 15.9 per cent for 2018, but cut 2019 growth forecast from 5.2 per cent previously to 2.6 per cent.
“The adjustment was across the board (not just for memory chips), indicating broad-based demand weakness amid the global economic slowdown.
“We see a downside bias to semi sales growth in 2019, unless the US-China trade tension eases off,” it said.
AllianceDBS said while Apple had exercised some conservatism in the build order for iPhone XS/Xr, sales was weak this time around, falling by 20 per cent year-on-year in the fourth quarter 2018 (4Q 18).
“Similar to last year, we expect inventory correction for the iPhone to happen over 1Q19-2Q19 again, which could cause component orders to fall by up to 30-40 per cent,” it said.
AllianceDBS said early supply chain rumours point to triple-lens rear camera and upgraded TrueDepth camera (smaller or no notch) for the next iPhone in 2H19 and felt that this might not be “revolutionary” enough to entice users to upgrade and thus, driving the replacement cycle longer.
The research house said stakeholders should be patient, as in the near term, it expected stock performance to remain sluggish as more negative news emerge from the supply chain.
“We are still very early into the earnings downgrade cycle for the sector, which we believe will play out through 1H19.
“Once that is over (estimated by March-April), we will turn more constructive and look out for stocks with potential re-rating catalysts,” it said.
AllianceDBS said these stocks would include Inari Amertron Bhd, Globetronics Technology Bhd and Malaysian Pacific industries.