The chip industry has performed well in recent years, surpassing the performance of leading U.S. indices, such as the Nasdaq and the S & P500. What effects did the corona crisis have on the industry and what is expected going forward?

How can I summarize the last year for the shares of the chip industry? What effect did the corona crisis have on them, if at all?

Shalom Zohar, the chip companies, or semiconductors, have shown decent price increases over the past year, under the auspices of the major trends that are increasing the demand for chips, such as cloud computing and artificial intelligence. At the same time, the companies’ assessments in the industry for the entry and implementation of advanced technologies such as 5th generation, electric and autonomous vehicles and of course the IoT or Internet of Things field, support their performance. Most companies in the industry enjoy a growing demand for processors, server farms and memories, and in light of this some have touched new highs over the past year. The good performance can also be attributed to the transition to remote work following the Corona crisis, which created an increase in demand for server farms, as well as estimates that no Damage to the main trends on which the activity of companies in the industry rests.

Oren, the chip market also had less good years. Can you tell me about it?

Definitely. The chip industry is characterized by cyclicality, while at the end of 2018 it ran into a crisis that included declining sales, due in part to the US-China trade war, tightening regulation and rising inventories. In practice, we saw a relatively rapid recovery in At the beginning of the Corona crisis, they did not materialize and it can be said that the industry is enjoying the consequences of the crisis.

Looking at the performance of the chip industry relative to that of the leading U.S. indices, one can see an excess return of the chip companies. For example, as of mid-December, the SOX index of the chip companies has risen by 116% in the last 3 years, while That the Nasdaq index achieved a return of about 91% and the s & p500 index added only about 37% to its value in that time period.

And finally, Oren, what are the main processes that characterize the chip market today, and are expected to continue going forward as well?

It is important to say that the complexity of chip production increases over time, and as that complexity increases and economic viability decreases – fewer companies remain in the game. As a result, the chip market has undergone a process of huge mergers in recent years, which naturally benefit the largest and leading companies in the industry.

Another way to look at the chip market is to look at the companies that manufacture the equipment or machines that the chip companies use. This is a market with a very limited number of manufacturers at every point in the production chain. These are companies that have very profitable years, and years that are unprofitable or low-profit. Despite the relatively high rise in chip and multiplier stock prices, it appears that rising demand and the expectation of continued major trends fueling industry activity will continue to support the industry well into the future.