People sometimes compare semiconductors to oil. Both industries are essential to the economy, key to understanding geopolitics, and notoriously cyclical. When economies are performing well people need more energy and computer power.
Tip style
Value
Risk rating
Medium
Timescale
Long Term
Bull points
- Highly cash generative
- Strong economic moats
- Beneficiary of state chip subsidies
Bear points
- Earnings forecast to drop
- Cyclical part of the chip sector
- Chinese sanctions
However, demand for semiconductors can prove more elastic than the black stuff. When consumers feel the squeeze, the latest technology is usually the first expense to be cut. In the three months to December, iPhone sales dropped 8 per cent while Mac sales were down 29 per cent and wearables 8 per cent. It turns out people can get by just fine without the most recent Apple Watch.