The surge in semiconductors is not just due to artificial intelligence

Recently, the chip semiconductor sector has risen sharply, and some people think that it is stained with the light of artificial intelligence, but it is not. The sharp rise in the semiconductor sector is because the industry cycle turning point is approaching, and the inventory leading indicator has begun to fall. The biggest difference between artificial intelligence and semiconductors is that the semiconductor sector is really supported by fundamentals.

Although the semiconductor is a technology industry in China, if it is placed in the United States and Japan, the semiconductor is actually an industry with relatively strong manufacturing attributes, and its most typical characteristic is that the cyclical volatility of the industry is particularly strong. Therefore, the study of semiconductors not only depends on its localization logic, but also the current cycle position of the industry is very important.

The cycle of the global semiconductor industry is generally 3 to 4 years, since 2008, the characteristics of each cycle are basically the same, that is, the first half of the rise, the second half of the decline, this law has been maintained for more than a decade. The current cycle in the semiconductor industry started in the second quarter of 2019, which has been four years, and the decline in the second half has been nearly two years since the third quarter of 2021. According to the law of the industry, a new round of upward industry cycle will be launched in the second quarter or the second half of this year.

The semiconductor inventory index is a leading indicator, and destocking is a necessary condition for the industry cycle to start. In January this year, the semiconductor industry inventory index reached a record high near, and the bottom of the industry in 2008 and 2011 is basically at the same level, but the inventory index in February showed a significant decline, combined with the recent Samsung Electronics announced production cuts, it is expected that the bottom of the semiconductor industry is in sight.

If you look at the stock price in combination with the fundamentals of the industry, you can find that the two are basically synchronized. For example, the current cycle of the semiconductor industry began in the second quarter of 2019, but the stock price of the semiconductor sector was started one quarter ahead of schedule in January 2019, the basic peak of the industry was in the second quarter of 2021, and the time of the peak of the stock price was basically synchronized after August 2021. As fundamentals began to retreat, share prices fell for nearly a year and a half, bottoming out in December, almost another quarter or so before the industry cycle turned.

This round of chip semiconductor market can not simply be seen as the spread of artificial intelligence concept, the industry cycle turning point is coming is the biggest fundamental. Although the localization of semiconductor equipment and materials is a very tough long logic, the new cycle is about to start may be a time span in units of the market, and this time is likely to be a comprehensive opportunity for the semiconductor industry, not just a structural market is so simple.