The semiconductor industry has been under pressure, but Morgan Stanley sees opportunity in one corner: the bond market. This is a market involving the production of integrated circuits and microelectronic components, driven in part by demand for electronic products such as smartphones and electric vehicles. Investment bank analysts wrote in a research report on August 22: “The overall cycle is slowly recovering, and equipment suppliers with higher advanced packaging businesses should outgrow peers in the second half of 2024… Due to cyclical and long-term tailwinds, we remain optimistic on the bond market, they added: “Many expect the cyclical recovery in 2H24 may be delayed. However, we do expect this cycle to occur in 1H25 and coincide with material growth in (thermal compression) and hybrid bonders. Analysts at Morgan Stanley wrote that thermal compression (TCB) and hybrid bonding will add more than $1 billion to the total back-end addressable market starting in 2025. They added, “We believe that starting in 2025, This new product cycle will be a “significant component of back-end equipment company revenue,” with 96% growth between 2023 and 2026. Stocks to Watch Here are three global equipment suppliers that Morgan Stanley likes. BE Semiconductor Industries: The investment bank describes the Dutch company as a “virtual monopoly on the emerging hybrid bonding technology currently used by several large semiconductor manufacturers.” Analysts expect the company’s revenue to continue growing in the coming years. BESI’s shares are listed on Euronext Amsterdam and traded in the United States as American Depositary Receipts (ADRs). Higher than 50% upside potential. ASMPT: Morgan Stanley said the Hong Kong-listed company has “technological leadership” in the hot-barrel welding machine market. The bank said it expects revenue from TCB instruments to grow at a compound annual growth rate of 60% over the next three years. ASMPT’s shares also trade in the United States as American Depositary Receipts. Morgan Stanley has a price target of HK$130 ($16.67) on the stock, giving it nearly 50% upside potential. Hanmi Semiconductor: Morgan Stanley says the stock is now a good buy due to its “continued dominance” in SK Hynix’s HBM3/3E space, strong TCB demand growth prospects and Micron Technology’s rising share price. “A good time to accumulate positions.” Hanmi Semiconductor’s shares are listed on the Korea Exchange and trade in the Cambria Emerging Shareholder Yield ETF (weight 2.2%) and the Invesco Dorsey Wright Developed Markets Momentum ETF (weight 1.2%). Morgan Stanley has a price target of 160,000 won ($120.28), implying a potential upside of just over 30%. —CNBC’s Michael Bloom contributed to this report.
