sg
SG
Singapore
en-SG
sg_retl_classes
intm
Intermediary
en
en
World in Motion – Global equities blog

The Legend of Semiconductors

Two pictures of the character Link from the Nintendo game The Legend of Zelda – 34 years apart.

Comparison of the computer game from 1986 and 2020

Source: Nintendo

What has this got to do with global investing? Is it that Link is brave and fearless in his quest to save Princess Zelda, like your Columbia Threadneedle portfolio managers? Afraid not – it is the image quality. We emphasise quality in all our investments, of course, but in this case it simply illustrates the progress that semiconductors have made in the past 30 years, and with them computing power and graphics. This improvement is at the heart of many critical products, not just video games. From mobile phones to the internet, from search engines and cloud computing to the AI that will drive the future, they are all dependent on computer power and semiconductors.

A recent presentation from our tech team started with this chart:

R1000 tech sales share of global gdp

Source: Bloomberg, January 2021

Using Russell 1000 tech sales as a proxy, it shows that the tech intensity of GDP continues to grow. At the heart of this is the semiconductor industry – so not only is it growth, but the really good news is that it is quality as well. Over the past few decades the industry has consolidated with fewer participants making new capacity decisions, the result of which is that the industry in more profitable and the previous intense cyclicality has changed – even for suppliers of capital equipment to the semiconductor companies. This is really visible in Figure 1, showing industry profitability:

Figure 1: Financial performance for semicap players over the cycle

Financial performance of semicap players

Source: Bloomberg/Bernstein, January 2021

Semiconductors are the building blocks of the modern economy and represent quality growth in our portfolios – we’re not adverse to the odd video game company as well.

22 April 2021
Neil Robson
Neil Robson
Head of Global Equities
Share article
Apple web badge
Spotify web badge
Listen on Stitcher badge
April 2021
Share article

Important Information: For use by Professional and/or Qualified Investors only (not to be used with or passed on to retail clients). This is an advertising document.

This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.

In Australia: Issued by Threadneedle Investments Singapore (Pte.) Limited [“TIS”], ARBN 600 027 414. TIS is exempt from the requirement to hold an Australian financial services licence under the Corporations Act and relies on Class Order 03/1102 in marketing and providing financial services to Australian wholesale clients as defined in Section 761G of the Corporations Act 2001. TIS is regulated in Singapore (Registration number: 201101559W) by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289), which differ from Australian laws.

In Singapore: Issued by Threadneedle Investments Singapore (Pte.) Limited, 3 Killiney Road, #07-07, Winsland House 1, Singapore 239519, which is regulated in Singapore by the Monetary Authority of Singapore under the Securities and Futures Act (Chapter 289). Registration number: 201101559W. This document has not been reviewed by the Monetary Authority of Singapore.

In Hong Kong: Issued by Threadneedle Portfolio Services Hong Kong Limited 天利投資管理香港有限公司. Unit 3004, Two Exchange Square, 8 Connaught Place, Hong Kong, which is licensed by the Securities and Futures Commission (“SFC”) to conduct Type 1 regulated activities (CE:AQA779). Registered in Hong Kong under the ce (Chapter 622), No. 1173058.
In the UK: Issued by Threadneedle Asset Management Limited, registered in England and Wales, No. 573204. Registered Office: Cannon Place, 78 Cannon Street, London EC4N 6AG. Authorised and regulated in the UK by the Financial Conduct Authority.

In the EEA: Issued by Threadneedle Management Luxembourg S.A. Registered with the Registre de Commerce et des Sociétés (Luxembourg), Registered No. B 110242 44, rue de la Vallée, L-2661 Luxembourg, Grand Duchy of Luxembourg.

In the Middle East: This document is distributed by Columbia Threadneedle Investments (ME) Limited, which is regulated by the Dubai Financial Services Authority (DFSA).
For Distributors: This document is intended to provide distributors with information about Group products and services and is not for further distribution.
For Institutional Clients: The information in this document is not intended as financial advice and is only intended for persons with appropriate investment knowledge and who meet the regulatory criteria to be classified as a Professional Client or Market Counterparty and no other Person should act upon it.

In Switzerland: Threadneedle Asset Management Limited. Registered in England and Wales, Registered No. 573204, Cannon Place, 78 Cannon Street, London EC4N 6AG, United Kingdom. Authorised and regulated in the UK by the Financial Conduct Authority. Issued by Threadneedle Portfolio Services AG, Registered address: Claridenstrasse 41, 8002 Zurich, Switzerland.

Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

Related Blog Posts

17 October 2024

Power hungry AI - investment implications in the era of energy transition

Understanding the options for power provision and assessing the investment opportunities resulting from AI’s thirst for energy.
9 October 2024

Neil Robson

Head of Global Equities

Five quality growth stocks with potential in all weathers

From US railroads to e-commerce platforms. We highlight five diverse businesses with one thing in common - strong competitive advantages.
23 August 2024

Neil Robson

Head of Global Equities

US election: the Inflation Reduction Act (IRA) and the risk of repeal - Implications for investors

The macroeconomic backdrop is changing, or at least uncertain. This could shift the pricing of risk assets, but it won’t change what we do, which is look for stronger competitively advantaged businesses that fit our quality growth philosophy.
Watch time - 10 mins

You may also like

Investment approach

Teamwork defines us and is fundamental to our investment approach, which is structured to facilitate the generation, assessment and implementation of good, strong investment ideas for our portfolios.

Our funds

Columbia Threadneedle Investments has a comprehensive range of investment funds catering for a broad range of objectives.

Our capabilities

Teamwork defines us and is fundamental to our investment approach, which is structured to facilitate the generation, assessment and implementation of good, strong investment ideas for our portfolios.

Thank you. You can now visit your preference centre to choose which insights you would like to receive by email.

To view and control which insights you receive from us by email, please visit your preference centre.

Woman listens to music through headphones
Play Video

CT Property Trust- Fund Manager Update

Sed ut perspiciatis unde omnis iste natus error sit voluptatem accusantium doloremque laudantium