The semiconductor industry has recently found itself amidst a turbulent periodThe first quarter of this year saw significant declines in performance for numerous companies within the sector, raising questions about future growth potential and resulting in a swift escalation of valuation levelsThis downward trend has caught the attention of both investors and analysts alike, leaving them to ponder the underlying factors contributing to this shift.
As we moved into late April, the semiconductor market experienced a substantial pullbackThe Shenzhen Semiconductor Index recorded a striking decline of 11.91% over just three trading days from April 21 to April 25, rendering it the worst performer among the 124 industry indices monitored by the Shenwan classificationThis decline marked a sharp contrast to the bull run that had characterized the sector over the past few years, which had been bolstered by an insatiable global demand for electronics and advanced technologies.
In the first quarter, public mutual funds had notably increased their stakes in the semiconductor sectorBy the end of the period, the proportion of semiconductor stocks in their portfolios climbed from 5.41% at the beginning of the year to 6.61%, indicating a significant 1.20 percentage point increaseThe combined market capitalization of semiconductor stocks held by public funds surged from 155.4 billion yuan to 198.3 billion yuan, an impressive 27.61% rise that outpaced the Shenwan Semiconductor Index's growth of 11.05% during the same timeframe.
Analyzing the sector's seven sub-industries, it became evident that the weight of semiconductor equipment and integrated circuit packaging significantly increased, while the share of analog chip design and discrete devices saw a considerable decreaseThe remaining three sectors exhibited stable weight distributions with no noteworthy shifts.
Additionally, northbound capital displayed signals of divestment
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As of April 24, the proportion of holdings in the semiconductor sector stood at 2.68%, which marked a decline of 0.11% from the end of the first quarter and a 0.22% decrease from the start of the yearThis trend suggests a cautious sentiment among institutional investors regarding the sector's immediate prospects following disappointing earnings reports from several listed semiconductor firms.
Indeed, the financial performance of semiconductor companies in the first quarter was a mixed bag, with many experiencing sharp declinesOut of the 33 publicly listed companies that had released quarterly reports by April 25, 22 reported a year-over-year decrease in operating revenue, while 25 reported declines in net profit attributable to shareholdersOverall, these firms collectively recorded a net profit of only 883 million yuan for the quarter, which translates to a staggering year-on-year decline of 76.68%—a statistic that has raised alarm bells in investment circles.
Examining the buying and selling actions among public funds regarding semiconductor stocks reveals a more intricate narrativeAt the end of the first quarter, public funds maintained substantial holdings in 112 semiconductor stocks, which constituted 88.89% of the total number of listed semiconductor companiesThe market capitalization of these holdings reached approximately 198.3 billion yuan, marking an upsurge of 27.61% from the previous quarter, significantly outperforming the benchmark index growth.
While there was a surge in holdings within certain industries, the fluctuations among the various semiconductor segments were diverseData indicated that two industries—semiconductor equipment and integrated circuit packaging—witnessed a notable increase in their weightings, while the proportions for analog chip design and discrete devices witnessed substantial drops
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The digital chip design, integrated circuit manufacturing, and semiconductor material sectors experienced relatively minor changes.
Specific companies reflected this trend as wellFor instance, among the semiconductor stocks that remained highly favored by public funds at the end of the quarter, 64 out of 96 continued to be major holdings, with their total market value risingSome standout performers included companies like Cambrian AI and Yi Micro, which saw unprecedented increases in their valuations, with Cambrian recording an astonishing 1,090-fold increase in market cap from the previous quarter.
Conversely, some of the sector's leading players such as Unisoc and Semiconductor Manufacturing International Corporation experienced significant sell-offs, with reductions in their holdings by public funds nearing 53.39% and 23.27% respectivelyNotably, these companies faced headwinds as their respective stock prices plummeted amidst broader market uncertainties.
Overall, the performance downturn for semiconductor companies has certainly affected the entire sector's valuationsFor instance, despite the Shenwan Semiconductor Index dropping by 4.72% since early April, the price-to-earnings ratio (P/E) concurrently rose from 42.03 to 44.02. Should the earnings reports of additional firms reveal further declines, it is plausible that the P/E ratios within the semiconductor sector could continue to balloon, adding pressure to already strained market perceptions.
Moreover, northbound capital has seen a general trend of reduction in semiconductor investmentsAs of late April, these investments accounted for merely 2.68% of the total circulating market value of the semiconductor sector, down from previous quartersDelving deeper into the sub-industries, however, showed that segments such as digital chips and integrated circuit packaging received an uptick in investment, reflecting selective confidence amid broader skepticism.
This intricate web of market dynamics emphasizes not only the volatility associated with semiconductor investments but also the different levels of investor sentiment across diverse segments
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