Are Semiconductor Sales Peaking?
Semiconductor stocks have been on a tear lately as chip demand is robust, as US firms have been piling in.
Further helping the cause, semiconductor manufacturers can’t produce enough chips, which gives them significant pricing power.
The graph below warns, investors may be over-exuberant.
As shown, courtesy of Stouff Capital, semiconductor sales strongly correlate with credit growth in China.
Given China produces a large number of goods using chips, the relationship makes sense. Recently, China has clamped down on credit creation resulting in negative credit growth and, not surprisingly, weak economic growth.
If the semi-credit relationship holds up, the graph portends semiconductor sales may appreciably underperform sales estimates for 2022.
However, the shortage of chips and demand for products using chips, such as cars, provides a decent base of demand for future sales.
Sun, 11/14/2021 – 09:20