Market commentary by eToro analyst for Romania, Bogdan Maioreanu: Semiconductors sector is improving

The global semiconductor sector is showing signs of improvement after suffering in the last year due to lagging PC and video game consoles sales. Worldwide sales of semiconductors totaled $134.7 billion during the third quarter of 2023, an increase of 6.3% compared to the second quarter of 2023 while still down 4.5% compared to the third quarter of 2022. According to the Semiconductor Industry Association, in the last quarter, sales of semiconductors increased in Europe by almost 7%, decreased in the Americas by 2% and in China they decreased the most, by over 9% year on year.

PC shipments  declined 7.6% year over year in the third quarter of 2023, with 68.2 million PCs shipped, according to preliminary results from the International Data Corporation as demand and the global economy remain subdued. But there are signs of recovery as PC shipments have increased in each of the last two quarters, slowing the rate of annual decline and indicating that the market has moved past the bottom of the trough. This is affecting the business of Intel and AMD.

AMD announced its revenue for the third quarter of 2023 of $5.8 billion, a 4% increase year on year and diluted earnings per share of $0.70. This result was helped in part by the company’s Ryzen 7000 series PC processors and “record server processor sales,” AMD Chair and CEO Dr. Lisa Su, said in a statement. Not all business segments performed the same. Data Center segment revenue was $1.6 billion, flat year-over-year, client segment revenue was $1.5 billion, up 42% year-over-year driven primarily by higher Ryzen mobile processor sales. Gaming segment revenue was $1.5 billion, down 8% year-over-year, primarily due to a decline in semi-custom revenue, partially offset by an increase in AMD Radeon GPU sales. Embedded segment revenue was $1.2 billion, down 5% year-over-year primarily due to a decrease in revenue in the communications market.

AMD gave a muted outlook for its fourth quarter, citing weakness in areas including chips used in videogaming. But the company suggested that the PC market was improving and forecast more than $2 billion of revenue from its advanced AI chips next year, spurring a 6% climb in its shares early Wednesday.

AMD’s biggest rival, Intel posted better than expected results, with third-quarter revenue of $14.2 billion, but still down 8% year over year. Figures are decreasing year on year, Client Computing being down with 3%, Data Center and AI down 10%, network down 32%. But Intel is opening new production facilities in Europe in order to create a geographically balanced, secure and resilient to geopolitical pressures supply chain. Intel opened Fab 34 in Leixlip, Ireland, during the quarter. They will open a wafer fabrication facility in Magdeburg, Germany, and a planned assembly and test facility in Wrocław, Poland.

So far investors trusted the technology sector, from the beginning of the year,TSMC is up 19%, AMD up 69%, Intel 40% and Qualcomm, only 3%. Also AMD is the 15-th and Intel is the 16-th most held stocks by Romanian investors on the eToro social investing platform.

Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.

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02.11.2023 / Editor, Andreea Dragan