After the pandemic, more people are working and studying from home, and this has led to a surge in demand for laptops, computers and smartphones. The shift to automation, the increased use of medical devices and the electrification of transport, which requires a lot of chips, have all contributed to the missing link in the supply chain. As a result of this situation, the companies involved in their production are thriving. Shares of ON Semiconductor rose 7 percent after the release of quarterly forecasts that beat expectations. This has helped the shares of other chip companies, and chips look set to provide them with steady earnings this year. The success of chips and semiconductors is underpinned by the rise in Nvidia shares this year, which have climbed to more than 97 percent.
ON Semiconductor's share performance over the past five years (Source: Google) *
Nvidia's share performance over the past five years (Source: Google) *
A new player in the market comes from the UK
British chip design company ARM, whose technology is used by virtually all of the world's smartphones, plans to list on the Nasdaq, the US stock exchange. It is believed that the company could raise between 8 and 10 billion US dollars by selling shares, which would streamline production and help the company to significantly strengthen its position in the chip market. [1] ARM was bought in 2016 by investment group SoftBank for a then-$32 billion and delisted from the London Stock Exchange. In 2020, it was to pass into the hands of the manufacturer of graphics chips, Nvidia, for 40 billion USD. This planned transaction was eventually cancelled due to regulatory hurdles, and ARM is now going public. The size and price terms of the proposed initial public offering (IPO) have not yet been set, but the head of investment group SoftBank has announced that he plans to retain a majority stake in the company. With a 22 percent drop in the total number of IPOs in the US market since the start of the year as stock market volatility and economic uncertainty have deterred many bidders, ARM is one of the few chip companies to list on the exchange this year.
Chips as a sought-after commodity
About 75percent of chip manufacturing factories are located in China, Japan, South Korea and Taiwan. According to J.P. Morgan Research, the current shortage should end soon, but some types of chips will still be in demand in the market. In 2023, the supply of chips and raw materials for their production is expected to stabilize, as they are a fundamental factor in a healthy industry. [2]
Olivia Lacenova, chief analyst at Wonderinterest Trading Ltd.
* Past performance is no guarantee of future results.
[1,2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or on the current economic environment, which may change. Such statements are not guarantees of future performance. They involve risks and other uncertainties that are difficult to predict. Results may differ materially from those expressed or implied by any forward-looking statements.
