Page 29 - DIY Investor Magazine | Issue 29

All areas of digital advertising showed growth in 2020, in spite of an extraordinary year. At the same time, TV advertising saw significant declines. Partly, TV suffered from a lack of sporting events, but there are longer-term phenomenon at work.
Online alternatives are numerous, effective and relatively inexpensive. The advertiser is deserting linear TV because they’re getting much better results from Facebook or Google, where they can target their consumers more accurately.
This is in contrast to linear TV, where advertisers could be blasting out ads to an indifferent public. This shift is allowing digital advertising companies to push up their prices. We see this phenomenon building momentum in the year ahead.
SEMICONDUCTOR SHORTAGES HIT THE AUTO SECTOR
For much of this year, the world has been in the grip of a semiconductor shortage. In the first quarter, semiconductor companies ran through their buffers, using up inventory to meet existing obligations.
Now, in the second quarter, they find themselves still limited by production difficulties, plus a fire at a major Japanese supplier to the auto industry and a shortage of water in Taiwan.
‘OUR VIEW IS THAT THERE IS A SECULAR TREND TOWARDS SEMICONDUCTORS IN THE ECONOMY’
The impact of this shortage has been far-reaching, hurting production of everything from hairdryers to laptops. However, it is in the car industry that the biggest impact has been felt.
Ford, for example, recently said it would shut down its factories and miss its production targets because of chip shortages.
Modern cars are chip-intensive: any new-build car will use semiconductors for areas such as emissions control and safety. Electric cars use even more. It was always a lean supply chain and now car companies can’t get hold of the chips they need. Some of the auto stocks are being hit hard, because they can’t make cars.
The shortage should start to resolve in the third and fourth quarters, but it will take until 2022 to normalise. Many of the semiconductor companies have been reporting good earnings as a result.
There are lingering concerns that they may add too much capacity and this might be good as it gets, which has prompted some profit-taking. However, our view is that there is a secular trend towards semiconductors in the economy, whether it’s autos, cloud computing, more sophisticated cars or high functionality laptops.
HEALTHCARE AND THE CLOUD
Big data can legitimately claim a role in the vaccine rollout. Moderna took just two days to come up with the vaccine formula once it had the genetic sequence of the vaccine.
The remaining time was focused on testing and approvals. This neatly highlights the power of next generation cloud computing. As we see it, it could be running companies’ more
‘BIG DATA CAN LEGITIMATELY CLAIM A ROLE IN THE VACCINE ROLLOUT’
mundane operations in the years to come. The drug industry will be one of the major users of these new data systems. The power of cloud computing, combined with new software, allows healthcare companies to upload swathes of patient data, which in turn allows speedy analysis: are they running trials effectively? Should they change the dosage? What anomalies are emerging?
Healthcare is one of the largest sectors for data warehousing group Snowflake. It reports the drug industry transitioning to put more of their data into the system to be able to do analysis on that data.
The healthcare industry is likely to see a revolution postCovid, with the pandemic exposing not only a worrying lack of resilience, but also the extent of what may be possible in drug development. In our view the cloud has a vital role to play.
SILICON VALLEY BYTE SIZE
With continuing signs of economic recovery, Walter Price and Mike Seidenberg talk to Cherry Reynard about the cyclical and ‘value’ parts of the technology sector likely to benefit. Tailwinds still remain though for high growth companies that did so well in 2020 and the team describe how they will play their part in
a new dynamic as people emerge from lockdowns across the globe.
29 DIY Investor Magazine | Jun 2021