Can Can Can

Can Samsung Q2 results stop the bleeding in semiconductors?

Equities 4 minutes to read
PG
Peter Garnry

Head of Equity Strategy

Summary:  Semiconductors have fallen from the pink skies as rising interest rates have compressed equity valuations making semiconductor stocks the fifth worst theme basket in our universe of themes. However, Samsung showed this morning in its Q2 results that things are maybe a bit less bad than feared, but the outlook comes with dark clouds and massive uncertainty. It does feel like it will get worse because it gets better for semiconductor. We still remain very bullish on semiconductors long-term due to the ongoing digitalization.


A horrible year

Semiconductors were a hot theme going into 2022 and one of our preferred equity themes based on long-term growth drivers such as electric vehicles adoption (EVs use 5x more semiconductors than normal gasoline cars), more datacenters, Internet of Things, and continued growth in consumer electronics. However, these rosy assumptions faced stiff headwinds this year from rallying bond yields compressing equity valuations in semiconductor stocks causing our semiconductor theme basket to decline 34% this year making it the fifth worst basket this year.

Samsung has reported preliminary Q2 results this morning and South Korean electronics maker reported KRW 77trn in Q2 revenue up 21% y/y and a 1% decline q/q from Q1. This was a bit better than expected, but operating income was KRW 14trn up 11% but lower than estimates of KRW 14.6trn suggesting cost pressures are larger than expected. While the market has rewarded Samsung for its Q2 results management sounded uncertain on the earnings call warning investors of immense challenges over its outlook due to inflation and the war in Ukraine. Samsung also said that consumers and enterprises are reducing their spending due higher interest rates and inflation are hitting disposable income.

Samsung’s results show that the industry is still growing but that considerable downside risks exist and that it could get worse for semiconductors before its gets better. Long-term we remain very positive on the semiconductors industry as it is a pivotal industry for the continued digitalization of the world, which is a trend that will continue at full speed the next decade.

Saxo Semiconductor theme basket vs MSCI World | Source: Bloomberg
Samsung share price (London listing) | Source: Saxo Group

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Saxo Markets
40 Bank Street, 26th floor
E14 5DA
London
United Kingdom

Support Centre
For existing clients, please click here to request support via the Support Centre.

Have a question about our products, platforms or services? Visit the Support Centre to find answers for our most frequently asked questions. If you are still unable to locate an answer to your question, you will also find contact details for your local Saxo office to speak with a representative.

Contact Saxo

Select region

United Kingdom
United Kingdom

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets UK Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.