The semiconductor industry has ruled the world’s indices and grabbed all the headlines. These components are the infrastructure on which the world of artificial intelligence (AI) will be built and, given the promise of a revolution in this technology being deployed around the world, the ‘chiperas’ have experienced a rally Completely historic. The paradigmatic case is Nvidia, which has soared by more than 850% since 2023. Although less spectacular, the Taiwanese giant TSMC has also been especially notable, soaring by 137%. However, while the sector is experiencing this situation in the world, the semiconductor industry in the Old Continent She lives trapped between stock market falls and a general feeling of stagnation and crisis.
The stock market returns of the European companies reflect this. ASML, the largest firm on the continent in this sector, has cut the enormous increases since the start of 2023, which were 100% until this summer and are now only 21%. In fact, The Dutch firm is trading negatively in 2024 with a decrease of 10.4%, according to its last closing. However, this is one of the best stops in the sector. Infineon plummets 20% so far this year. AMS Osram, 62%, STMicroelectronics gives up 43%, BE Semiconductor, 23%, Technoprobe another 22.4%, Soitec, 56%, and Melexis, 33%. Among the largest, the only one that opposes this trend is the Swedish Mycronic, which has soared 44% so far in 2024.
The disparity is evident between this group and companies like Nvidia. The reason is that artificial intelligence has experienced a real boom, But it is still a small part of the semiconductor industry, despite receiving almost all of the attention. Chips for generative AI are only a small part of the total processor volume and only represent a small part of manufacturing.
The ASML case
Although Nvidia is in the focus of the market, its case in reality is not representativeand even less can it be extrapolated to Europe. The great strength that the Californian firm has is that the processors for generative AI were sold at an average price of $40,000 in 2023 compared to the $0.57 at which one billion standard chips were distributed the previous year, a difference of 70,000 times, according to a Deloitte study. The most cutting-edge semiconductors increase the total revenue figures, but they only represent 0.1% of the total volume.
“Generative AI chips flying off the shelves are great news for the handful of companies that sell those types of chips or parts of those chips, but they do not contribute as much to the general industry,” explains the consulting firm’s report, which analyzes the 2024 forecasts.
ASML, although it is a European giant, is a reflection of this. The initial enthusiasm towards AI has to be based on sales and volumes, something that is not so imminent in the sector as a whole. “Although we continue to see important developments and great potential in AI, other market segments are taking longer to recover. Now it seems that this recovery is more gradual than it seemed and that in 2025 there will also be a little more caution,” Christophe Fouquet, CEO of this firm, calmed the mood in the last presentation of results. This resulted in a fall in the 15.6% on that day.
If the Dutch company’s accounts are broken down, it is observed that its ultraviolet light machines (EUV), those intended for the most sophisticated chips, represent the same percentage of sales as a year ago. That is, they have not sold more thanks to AI. This segment accounted for 35% of revenue in the third quarter of last year and remains at that same percentage in the third quarter of 2024, the last reported. The focus had been placed on this area, since he was expected to lead the company’s growth. ASML sells chip-making machinery, and demand for casting simpler computing processors for computers or cars remains stagnant.
AI does not compensate for the engine crisis
It all depends on the nature of the semiconductors that are marketed. While firms like Nvidia are the ones that have models most oriented to the future world of AI, the majority of European firms They are more oriented towards another type of profile. The clear example is Infineon, which specializes in microdevices for the automotive sector, for industrial applications, power sectors and digital security (such as mobile SIM cards).
In that sense, a good part of the semiconductor industry is totally exposed not to the future of AI, but to the present of the European industry and especially the engine, which, in particular, is going through a really difficult time. According to the latest data from S&P Global, the index PMI of the manufacturing sector of the old continent is at 46 points, that is, in recession (50 points marks the growth threshold). This is especially evident in the motor sector (German in particular) where low demand due to high interest rates, higher costs and greater competition from Chinese models is devastating these companies, something that has forced giants like Volkswagen to debate a possible closure of several factories, although for the moment it has resulted in cuts.
Infineon’s latest results made this problem clear. The firm based in Munich achieved around 8.24 billion euros in 2023 only thanks to the automotive sector, that is, more than 50% of all its income. Now, in the last quarter of 2024, it has seen its sales to the motor industry fall by about 4%. The fall has not only been on this last front, since digital security has also plummeted and has done so by around 26%.
“Continued disruption to supply chains resulting in excess inventory”
This has also been noted at STMicroelectronics, whose revenues have fallen by 26% in its latest results and its profits by 67%. In the first nine months of the year, revenues have fallen by 23.2%, as the company itself explained, due to “continued weakness in the industrial market and lower sales in the automotive sector.” In short, while the most successful firms in the world have linked their fortunes and prices to the hopes of AI and are already seeing how this translates into higher revenues and profits (as is happening at Nvidia), in Europe many of these firms They are tied to the demand of a secondary sector in low hours.
This latest series of bad feelings comes after a difficult time in 2023 and 2024 was, for analysts, the year that could mark the recovery. Deloitte explains in its latest sector report, published this summer, that last year was a “period of recession” at a global level, marked by supply problems and a decline in many of its segments. Beyond the engine, they pointed out that, at that time, “Sales for PCs and smartphones fell by 14% and 2.5%, respectively.” A market for which they see a recovery but believe that it will focus mainly on the performance of AI. In summary: “we expect that in 2024 total sales will grow by 13%, to $588 billion.” But there will be clear winners and losers.
From Fitch and pointing precisely to Europe, they comment that they hope that 2025 can mark the recovery, but they expect that this year will complete “two years of recession marked by bottlenecks in the supply chain (which has reduced margins) and geopolitical problems“. They agree from PwC, where they comment that they see several “headwinds” coming from 2023. They highlight, of course, the great damage of inflation but also “the continuous interruption of supply chains that caused inventory surpluses.” It remains to be seen see if now, with the motor crisis emerging strongly in Europe and particularly in Germany, the recovery can finally occur as predicted at the end of the first semester, expecting a rebound from 2025.
In any case, analysts believe that investors are undervaluing the sector and that the losses are excessive. In that sense, the consensus grants a revaluation potential of 38% to the European sector. All this because they believe that they will end up avoiding the crossing through the desert in which he is walking. Although they believe that the profit per share of companies in the sector will fall by 3% in 2024, they expect a strong potential of 20% for next year and another 27% for 2026. All of this as the European industry recovers. .
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