Shares of GlobalFoundries and United Microelectronics Face Downgrades
Shares of GlobalFoundries (NASDAQ:GFS) and United Microelectronics (NYSE:UMC) declined on Monday after Morgan Stanley downgraded both companies, highlighting increasing challenges in the semiconductor sector.
Downgrade Details
The downgrade moved both firms from an "overweight" to an "equal-weight" rating, indicating lower growth expectations due to industry-wide pressures.
Factors Impacting Prospects
Morgan Stanley’s updated outlook points to multiple challenges:
– GlobalFoundries faces a slower recovery in semiconductor demand amid rising competition, especially from Chinese companies and established players like Taiwan Semiconductor Manufacturing Company (NYSE:TSM).
– Overcapacity in the mature node segment raises concerns as firms might need to cut wafer prices to hold market share.
GlobalFoundries, primarily operating in mobile and IoT sectors, will confront pricing challenges as the average selling price of wafers declines. Morgan Stanley has lessened its growth expectations for the company in 2025.
Similarly, United Microelectronics’ price target has been revised down from NT$60 to NT$52. To remain competitive, the company is projected to lower its wafer prices by 4-5%, in response to TSMC's pricing strategy and overcapacity from Chinese fabs.
Despite progress with advanced 12nm production expected in Intel’s fabs by 2026, United Microelectronics faces a weak near-term outlook, with sluggish demand affecting sectors like automotive, PCs, and smartphones.
Current Market Dynamics
This subdued demand has resulted in elevated semiconductor inventories, adding pressure on both companies. TSMC, leveraging its market dominance, is dropping prices for mature node products by 2-3% while increasing prices for leading-edge technologies like AI semiconductors.
Consequently, second-tier foundries such as United Microelectronics and GlobalFoundries are under additional pressure to adjust their pricing strategies to maintain market positions.
Historically, GlobalFoundries' reliance on trailing-edge technologies offered a buffer against competition. However, the slower-than-expected recovery in key markets, such as automotive, is dampening growth prospects.
Though supply chain shifts due to geopolitical changes could present opportunities, competitors are swiftly catching up.
In conclusion, while both GlobalFoundries and United Microelectronics remain significant players in the semiconductor field, Morgan Stanley’s downgrade reflects a lack of immediate catalysts and ongoing margin pressures throughout the industry.
Comments (0)