The chip sector slowdown in the current quarter is likely to last well into next year, a Wall Street firm says. Investment bank UBS on Thursday forecast semiconductor industry revenue to decline year-over-year in 2019 for the first time since 2015.
UBS sees semiconductor industry revenue dropping 4.3% in 2019, driven by a downturn in memory chip sales. Memory chips account for 34% of total industry revenue, the firm said. It forecast record semiconductor industry revenue of $473 billion in 2018.
“We expect year-over-year semis revenue growth to trough by Q3 2019, with semis stocks typically in sync or slightly anticipatory of the trend,” the UBS analyst team said in a report to clients. It called the current market “challenging.”
U.S.-China trade tensions remain a major risk for chip stocks, UBS said.
Best-Positioned Chip Stocks In ‘Challenging’ Market
Several chip stocks are better positioned than others to ride out the current down cycle, the bank said. It likes Taiwan Semiconductor Manufacturing (TSM) for its technology leadership and Marvell Technology (MRVL) and Broadcom (AVGO) on valuation.
UBS rates all five chip stocks as buys.