The semiconductor sector has been under pressure, but Morgan Stanley sees an opportunity in one corner: the bond market. It is a market involved in the production of integrated circuits and microelectronic components and is driven in part by the demand for electronics such as smartphones and electric vehicles. “The overall cycle is recovering slowly and equipment vendors with advanced packaging exposure should outperform their peers in 2H24… We remain optimistic about the bond market due to a combination of cyclical and secular tailwinds,” investment bank analysts wrote in an Aug. 22 research note. record. “The recovery cycle that many were expecting in 2H24 is likely to be pushed out. However, we expect the cycle to turn in 1H25 and coincide with the growth of material for (thermo compression) and hybrid bonders,” he added. Thermo compression (TCB) and hybrid bonding should add more than $1 billion to the total addressable market by 2025, Morgan Stanley analysts wrote. “We see this new product cycle becoming a useful part of the back-end equipment company from 2025,” on the back of 96% growth between 2023 and 2026, he added. Stocks to watch Here are three global equipment vendors that Morgan Stanley is bullish on. BE Semiconductor Industries : The investment bank describes this Dutch company as a “virtual monopoly in hybrid bonding technology that is now being adopted by many large semiconductor manufacturers.” Analysts expect the company’s revenue to continue to grow in the coming year. Shares in BESI are listed on Euronext Amsterdam and trade as American Depositary Receipt (ADR) in the US Morgan Stanley has a price target of 180 euros ($201.04) on the stock, giving it just over 50% upside potential. ASMPT : Morgan Stanley says this Hong Kong-listed player has “technology leadership” in the thermo-compression bond market. The bank expects a 60% revenue CAGR (compound annual growth rate) from TCB tools over the next three years. Shares in ASMPT are also traded in the US as ADRs. Morgan Stanley has a 130 Hong Kong dollar ($16.67) price target on the stock, giving it nearly 50% upside potential. Hanmi Semiconductor: Morgan Stanley said now is “a good time to accumulate positions” in the stock thanks to the “continuing dominance” in SK Hynix for HBM3 / 3E, TCB strong prospects for demand growth and showing results in Micron, among others. Shares in Hanmi Semiconductor are listed on the Korea Exchange and are traded in the Cambria Emerging Shareholder Yield ETF (2.2% weighting) and the Invesco Dorsey Wright Developed Markets Momentum ETF (1.2%). Morgan Stanley has a 160,000 Korean Won ($120.28) price target on the stock, indicating just over 30% upside potential. – CNBC’s Michael Bloom contributed to this report.
Morgan Stanley is the top choice name in the semiconductor sector corner
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