It’s not all doom and gloom for some economic sectors amid the COVID-19 pandemic, even as the number of cases and deaths continues to grow, causing shutdowns and unemployment.
Food providers and food delivery have seen demand increase as have some makers of disinfectants and pharmas that are researching new drugs and antivirals.
In the tech world, increasing work-from-home (WFH) means increasing bandwidth requirements as well as increased leveraging of public cloud and the providers that offer such services. The overall sector saw improvement on markets Monday, with Intel seeing a 6.4% improvement at noon eastern time.*
Laptops used for the WFH sector are literally heating up, and that is already leading to an upgrade cycle that benefits HP, Dell and Logitech, according to analysts.
In the semi sector, companies that make chips for everything from laptops to servers in hyperscale datacenter settings are expected to see benefits, according to a recent note from JP Morgan and others.
JP Morgan called out Broadcom, Intel, Micron Technology, Marvell Technology, Qorvo, Inphi and Nvidia as attractive stocks for investors in coming weeks. All of those stocks improved on Monday at noon eastern time, led by Intel at 6.4% and Nividia, Micron and Broadcom all obove 3%.*
Of that group, Micron last week reported a strong second fiscal quarter through Feb. 27 with $4.8 billion in revenue.
The memory and storage company contributed directly to the demand for WFH, quickly purchasing 5,000 notebook computers for some of its 37,000 employees in 18 countries, according to CEO Sanjay Mehrotra who spoke on the earnings call from the safety of his home.
Micron also reported it expects strong demand for data center products in all regions in its third fiscal quarter.
Robert Castellano, a market analyst who pens Semiconductor Deep Dive remarked, “the COVID-19 epidemic has unexpectedly breathed life into the server market as most normal activities have been replaced by a virtual ecosystem.”
In contrast, Mehrotra said Micron expects demand for smartphones, consumer electronics and autos to be below its prior expectations for the second half of fiscal 2020.
The lower demand for smartphones has led to reports and rumors that Apple will delay the debut of the Apple iPhone 12 5G smartphone beyond its normal September launch timeframe to—worst-case—2021. Nikkei Asian Review said a decision on the launch will be made in May at the latest, according to its sources.
Wedbush Securities has reported that an iPhone 12 5G launch in September or October is “extremely unlikely” due to “lingering supply chain issues that remain across Asia.”
Concerns about falling auto sales with the COVID-19 pandemic might seem to push some semiconductor makers to reconsider their investments in production of chips or research into chips intended for faster processing or AI in future AVs or even ADAS (Advanced Driver Assistance Systems). Edmunds has forecast U.S. auto sales will fall 35% year over year in March, down to 1,044,805 news cars and trucks with stay-at-home policies in place in many cities.
In one example, chipmaker Texas Instruments has recently touted its new Jacinto 7 processors, specifically the TDA4VM part for ADAS in future vehicles. One analyst, Roger Entner at Recon Analytics, cast doubt on whether TI would throttle back on its ADAS initiatives because of the drastic decline in auto sales. “TI plays the long game,” Entner said via email.
TI recently released white papers and videos in defense of its long game that describe its ongoing work for coming vehicles, including a video describing how Jacinto 7 TDA4x chips enable enhanced vehicle perception. One of those chips can simultaneously operate four to six 3-megapixel cameras, useful in automated parking when combined with sensor fusion and deep learning, TI said. The processors also support high resolution, 8-megapixel, front vision cameras, useful for driving in dimly-lit or rainy conditions. A white paper also describes the capabilities.
Jack Gold, an analyst at J. Gold Associates, said TI and other chipmakers might be willing to continue spending on R&D for auto-related chips while also suspending actual chip production. “There’s a difference between continuing the R&D which they must do and actually producing chips, which they can delay if the orders slow down,” he said. “They have to be ready to meet demand for chips when the market comes back, so keeping up R&D efforts, especially for more advanced systems that won’t be deployed for one to three years, is critical to long-term success.”
Gold added, “That said, I’m sure chip designers are telling their chip foundries that orders are slow right now and rather than build up inventory, just don’t make as many chips.”
It is interesting to note that most semi makers saw losses in share price at market close on Friday, but prices were still above the low point seen in the last month. The week of March 23- 27 continued the seesaw that all stocks have experienced, going from lows on March 23, a Monday, to record Dow gains on March 24-26, and capped by a down day on Friday March 27.
The Philadelphia Semiconductor Sector Index of 30 semi makers closed down on Friday by 5.33%, at $1,488.75, still well above its six-month low of $1,286.84 that it hit on March 18. * On Monday at noon ET, the index had improved by 3.25%.
It turned out that the March 24-26 market rally helped bring all of the following semi stocks well above prior lows that were hit on either March 18 or March 23: TI closed Friday down by 6.74% to $100.50; Intel closed down 5.71% at $52.37; Broadcom closed down 5.31% at $230.69; Marvell closed down 3.58% at $22.35; Qorvo closed down 3.35% at $80.69; Micron closed down 2.92%; Inphi closed down 2.58% at $74.31 and Nvidia closed down 1.75% at $252.73.
As for laptop makers, the ones that JP Morgan called out as beneficiaries of WFM were all down on Friday as well: Dell finished down by 8.9% to $38.75; HP finished down by 6% to $16.86; and Logitech finished down by 3.25% to $41.12.
Monday’s market opening will be another intense day for economists who try to interpret the corona-economy as the stock markets are seen as a strong indicator of whether an approved U.S. $2.2 trillion aid package makes a difference. Unemployment is expected to reach double digits, and coronavirus cases are continuing to grow.
Total combined COVID019 cases globally were nearing 700,000 with nearly 33,000 deaths recorded as of mid-day Sunday, according to John Hopkins University’s resource center.
* This story has been updated to include mid-day Monday financial market performance.