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Semiconductors see decade's largest boom: analysts

TAIPEI, Taiwan -- Following the stellar first quarter earnings results reported by semiconductor companies, including MediaTek (聯發科), SPIL (矽品) and UMC (聯電), on Tuesday, which exceeded expectations by 20 to 30 percent, Barclays yesterday said that the sector is in the midst of a boom unseen over the past decade.

The institutional investor said that the boom will not be short-lived and that it is expected to carry TAIEX toward the 9,000-point benchmark. Following the conclusion of earnings conferences hosted by semiconductor companies, Barclays upgraded the target share price of MediaTek to NT$570, while Citibank (花旗) upgraded the target share price of SPIL and UMC to NT$54 and NT$14.1 respectively.

Institutional investors attributed the stellar results reported by semiconductor companies to three rapidly rising trends that have propelled demand in the sector, including the arrival of the fourth-generation (4G) mobile broadband network and the migration toward 64-bit computing and eight-cored processor designs. Semiconductor companies whose operations are associated with the aforementioned developments have seen their performance results surge dramatically according to degree of correlation, said institutional investors.

A Barclays analyst stated that the compound annual growth rate for MediaTek shares is expected to sustain at a pace of 15 percent for the next three years until 2016. Analysts stated that the company is poised to benefit from continued growth in demand for mobile devices in China and other developing markets, and the rise in average selling price of its inventory enabled by the shift toward the more advanced octa-cored chips.

Citibank shared an equally upbeat outlook for SPIL, stating that profitability and return on equity ratings are expected to rise as yield rates, cost control and fabrication processes become more streamlined. For UMC, Citibank stated that the company is poised to begin seeing revenues contribution from its 28nm fabrication arm. In addition, beginning in the fourth quarter, UMC will no longer be obligated submit development obligation payments to IBM for FinFET multigate transistor devices.

Institutional investors remarked that analysts are accustomed to picking out one or two standouts that are able to exceed or withstand cyclical fluctuations, and that the stellar results currently being reported by the majority of companies across the semiconductor sector is rare.

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