Morgan Stanley"s bullish outlook on semiconductor stocks

Morgan Stanley has expressed optimism regarding the bonder market within the semiconductor sector, despite the overall industry facing challenges. In a research note dated August 22, 2024, analysts highlighted that the market for integrated circuits and microelectronic components is expected to benefit from both cyclical and secular trends, particularly driven by the increasing demand for electronics like smartphones and electric vehicles. Although the anticipated cyclical recovery in the second half of 2024 may be delayed, a turnaround is expected in the first half of 2025, coinciding with significant growth in thermo compression and hybrid bonding technologies. The analysts predict that these technologies will contribute over $1 billion to the back-end total addressable market starting in 2025, with a remarkable growth rate of 96% projected between 2023 and 2026. This new product cycle is anticipated to become a substantial revenue source for back-end equipment companies. Morgan Stanley has identified three key global equipment vendors that are well-positioned to capitalize on these trends. BE Semiconductor Industries is noted for its leading position in hybrid bonding technology, while ASMPT is recognized for its technological edge in the thermo compression bonder market, with a forecasted 60% compound annual growth rate in revenue from TCB tools over the next three years. Hanmi Semiconductor is also highlighted for its strong market presence and growth potential, particularly in relation to its partnerships with major semiconductor manufacturers. Overall, Morgan Stanley's analysis suggests that investors should consider these companies as they navigate the evolving landscape of the semiconductor industry, which is poised for recovery and growth in the coming years.