# Semiconductors: perception and reality (so far) 

_Despite the media’s panic, I expect the US economy to hold up well. Early results from semiconductor giants like TSMC and SK Hynix show strength, not collapse — and I think the tariff fears are overdone._

Neil Woodford · 28 April 2025 · 3 min read

![Semiconductors: perception and reality (so far) ](https://cdn.sanity.io/images/v3acfbvo/production/3cac371d77fcd6e8abca0c21082f5b4b07323015-6240x4160.jpg?w=1600&fit=max&auto=format)

---

In a very recent ABC News/Washington Post/Ipsos poll, 72% of Americans said that Trump’s economic policies will cause a recession illustrating not only the power but also the consensual thinking of the media since “Liberation Day” on the 2nd April. Despite the S&P’s rally to within 3% of its level before the tariff announcement, this consensus is also reflected in most professional equity market commentary. Despite this, I remain convinced that the US economy will weather this storm well and deliver the kind of growth in 2025 that most developed economies would be very happy with. I base this view not just on my expectation that Trump’s tariffs will end up being far more benign than was first assumed, but also because the US economy carried good momentum into the first quarter of the year from 2024, alongside lower interest rates and energy prices.

This week, the earnings season kicks off at scale in the US with up to a third of the S&P reporting Q1 numbers. These results will shine a light on that momentum, but we already have some insights into wider economic trends from some of the largest technology stocks in the world that have already announced results. These include TSMC, the Taiwanese semiconductor titan whose results showed revenues up over 40% and profits up 60% in the first quarter of 2025 on the same quarter last year. Last week, another global semiconductor business, SK Hynix, also announced its numbers. These again confounded pessimistic expectations and showed revenues up 44% year on year, margins up, and operating profits up 158% on a depressed Q1 2024. In the accompanying commentary, the CEO said that the results reflected a faster ramp in the memory market (SK Hynix is a global leader in the memory chip market) due to the huge increases in global AI investment alongside an uptick in the inventory cycle. The business also commented favourably on the fast-growing High Bandwidth Memory (HBM) market, which is expected to double in 2025.

At the post results meeting, Hynix’s CFO alluded to the potential for demand volatility amid global uncertainty but added some interesting detail. For example, he said that US customers accounted for 60% of the Company’s revenue, but added that the percentage of sales accounted for by direct exports to the US was not that high because the majority of shipments to US customers go to locations outside the US. Despite this resilience, the results, and underlying confidence, SK Hynix’s valuation remains very depressed at 4.4x 2025 consensus earnings, reflecting the consensual opinion that a disaster in the semiconductor industry is a near certainty.

Another semiconductor business, STMicroelectronics, also announced its first-quarter results last week. This company announced cyclically depressed earnings, which it expects to mark the low point of the current cycle in the demand for its specialist semiconductor products, especially in relation to its automotive and industrial revenues. Although the statement was generally cautious, there were as yet no signs of the impending disaster that the markets have assumed is a near certainty in this sector. STMicro’s shares, rather like SK Hynix, are also at a very depressed level, having halved since last summer and now trade on only about 15x next year’s consensus earnings (to December 2026), which could be materially higher if the cyclical recovery gains traction. Interestingly, based on current, non-ameliorated tariffs, one leading broker expects STM to pay something like US$10-15mn in tariffs for the whole of this year, a bill it expects the business to share with its customers. In the context of forecast revenues of US$11.5bn, you can see that this figure is broadly irrelevant.

SK Hynix and STMicroelectronics are companies I follow.