In 2014, the strong growth trend of the technology sector of recent years continued. Stocks in Asia (ex-Japan) were dragged by the launch of Apple's iPhone 6 and iPhone 6 Plus in September. They also benefited from Microsoft ending support for Windows XP users earlier this year, which resulted in and sustained a business PC replacement cycle. Further smartphone penetration in emerging markets and the moderate economic recovery in developed markets, leading to increased spending on corporate technology, also supported industry growth over the year.
But those positives in 2014 risk turning into obstacles for this sector in 2015 as it begins to lose momentum. Furthermore, some of that growth was associated with a single factor, which may not recur in 2015. As a result, we believe that the release of the next version of the iPhone in the new year, as well as other Apple products, will impact more content. We also believe there will be a less robust PC replacement cycle in 2015, slower smartphone penetration and lower IT spending by global enterprises. In that context, it might be more difficult to navigate the technology area.
The investments in the technology sector that we consider most interesting are the following:
– manufacturers of mobile devices whose products can serve as main sources of differentiation: these components include camera module lenses, casing players, fingerprint sensors.
– IT and hardware providers geared towards structural and long-term growth of cloud and big-datacomputing (while traditional enterprise technology spending may level off, enterprises are increasingly focusing on SMAC technologies – social, mobile, analytics, cloud ): Potential beneficiaries are suppliers of selected IT services and server hardware.
– Internet/e-commerce and mobile gaming company, with good exposure to the online service-oriented customer base, which is an ongoing secular trend.
– Panel vendors geared towards increasing display resolution/size, a factor that continues to be important for consumer electronics.
Further upstream, we continue to look favorably on semiconductor companies in the memory and foundry industries. We are convinced that current/future drivers, including mobile devices, Cloud, IoT/portable devices, and the challenges associated with technology migration, can maintain the balance between supply and demand.
Finally, we closely follow developments in LED general lighting, industrial automation, automotive electronics, portable devices and green energy, including vehicles. These are technological segments that can give surprising results by virtue of the long incubation periods and the new needs of consumers/companies.
