Taiwanese semiconductor / electronics companies reporting in April turned in results slightly ahead of seasonal with foundries and memory sectors outperforming expectations set by one investment bank. Handsets and components lagged while PCs appear to be on track yet still not coinciding with results of a recent VentureOutsoure.com survey.
According to industry researchers after just two months (February and March) of relatively strong, above seasonal performance, April Taiwan monthly sales were just slightly ahead of seasonal (see Chart 1).
Revenues declined -3.5% month-on-month, 190 basis points (bps) above seasonal -5.4% month-on-month, post March and February which were 420 and 1710bps above seasonal, respectively.
The report goes on to break-down trends for each of the following end-markets:
- Components and connectors, electronics manufacturing services (EMS)
- Foundry
- Test and packaging
- Memory
- Fabless ICs
- Printed circuit boards (PCB)
- Networking
- Motherboards
- Notebook PCs
- Distribution / retailers
- Handset components / systems
- Panel makers / LCD / Optoelectronics
- Solar
Chart 1: Taiwan monthly sales summary
April results suggest potential upside to calendar 2Q expectations for 13.9% quarter-on-quarter growth (seasonal +4.7% quarter-on-quarter), implying May and June month-on-month could be 100bps to 150bps below seasonal of -0.8% and +4.3% month-on-month while still achieving 2Q expectations.
Although upstream is outgrowing downstream on a month-on-month basis (upstream +1.9% month-on-month vs. downstream -9.4%), the team at investment bank CreditSuisse that includes John W. Pitzer, Randy Abrams – CFA, Stephanie Sun, Aashish Rao, Armen Poghosyan – CFA, and Tony Wu, believes the upstream / downstream gap persists, as upstream is growing off of a much lower base (downstream -18.7% from peak month to April vs. upstream -31.6% peak to April). Additional analysis and commentary is provided by Michael Palma with IDC.
Mid 2009 expectations
The bank’s bottoms-up analysis of C2Q revenue estimates for semiconductor companies it covers representing roughly two-thirds of the firm’s overall Taiwan database revenues shows the bank’s estimates are currently looking for overall revenue growth of +13.9% quarter-on-quarter over C1Q levels, versus historical seasonal 2Q growth of 4.7% quarter-on-quarter.
April revenues represent 33.5% of the bank’s C2Q expectations, above normal linearity of 32.9% suggesting a slight upside for the upcoming June quarter. (VentureOutsource.com’s April Technology Supply Chain Business Outlook Survey results do not reflect this same sentiment when looking at the technology sector, overall)
May and June month-on-month growth could be 100-150bps below seasonal growth of 80bps and +4.3% month-on-month, respectively to achieve +13.9% quarter-on-quarter growth.
April sales: Sector specifics
Of the 14 sub-segments CreditSuisse tracks, 9 (64%) posted above seasonal results, while 5 were below (36%). This compares to the month of March when 43% of segments were above seasonal and February when 100% of segments were above.
Chart 2 displays monthly outperformance and underperformance, based on internal CreditSuisse standards and criteria, relative to seasonality by month.
Chart 2: Monthly underperformance / outperformance to seasonality – Number of segments
For both 4Q08 and 1Q08, quarter-on-quarter growth was above seasonal for only one segment each quarter (7%) …handset component / systems and fabless ICs, respectively.
April performance by segment
The top performers for the month of April included foundries which grew 56.2% month-on-month, 55.9 percentage points above seasonality of +20bps month-on-month. Memory companies grew 20.0% month-on-month, vs. seasonal gains of +1.1%, and test and packaging grew 9.6% month-on-month vs. seasonal declines of -2.4%. (See Chart 3)
Chart 3: Taiwan technology end-market segment sales, April
On the negative side, handset components declined 7.1% month-on-month, 9.0 percentage points below seasonal gains of 1.9% (driven by HTC -8% month-on-month, Compal Communications -6.2% and a few smaller companies), and components / EMS declined 6.5% month-on-month, 450bps below seasonal declines of -2.0% month-on-month due to underperformance from Hon Hai which accounts for 83% of the segment’s revenues (-8.2% month-on-month, 590bps below seasonal). Its important to note, that, excluding Hon Hai, the category would have grown +2.9% month-on-month vs. -1.0% seasonal.
Handset component makers mentioned cuts from one tier-one handset customer’s low-end models, but should be offset by ramping volume for another smartphone customer in May.
April performance for PCs
Given recent negative data points around PCs, CreditSuisse highlights the notebook category where revenues fell -8.3% month-on-month, driven largely by Quanta (-13.0% month-on-month) and Wistron (-11.6% month-on-month).
CreditSuisse notes in its report that notebook declines were in-line with April seasonality of -8.4% month-on-month, and both Quanta and Wistron outperformed seasonal trends of -14.9% and -12.6% month-on-month. Normal month-on-month seasonal growth in May and June would bring C2Q for Quanta and Wistron to +16.9% and +17.8% quarter-on-quarter, respectively, vs. current estimates by the bank for +5% and +11% quarter-on-quarter and seasonality of +9.3% and +7.5% quarter-on-quarter. (See Chart 4)
Chart 4: Upstream vs. downstream year-on-year
One interesting point in the report highlights that upstream outgrew downstream in April on a month-on-month basis, with upstream +1.9% month-on-month exceeding downstream declines of -9.4%, bringing the year-on-year gap between upstream and downstream to 27 points (upstream -20% year-on-year, downstream +7% year-on-year) from March’s gap of 34 points and the February peak gap of 46 points.
However, upstream continues to undership real demand (note downstream has declined 18.7% from its peak month through April, while upstream has declined 31.6% peak to April) as such, the bank continues to expect several quarters of upstream outshipping downstream as visibility and end demand improves.
CreditSuisse also points out that post the October 2001 gap, the bank saw monthly improvements in the consumption / production gap for the subsequent 8 months, and upstream began outgrowing downstream one quarter following the peak, keeping in mind, however, history is not indication of events that may unfold in the future.
Chart 5: Gap between upstream and downstream
Taiwanese technology companies that went into the creation of CreditSuisse’s Taiwan tech end-market demand analysis are somewhat limited to providing a true snapshot of the overall perspective in the Taiwan tech universe since the bank only tracks 128 companies and only 109 of those 128 companies reported sales at the time of the release of the bank’s findings. Nonetheless, the findings still provide good insight.
Taiwanese electronics companies that were evaluated by the investment bank to create the perspectives in the report follow – each with its own end-market sector trend analysis.
Taiwan monthly sales – Sector by company
Components and connectors / electronics manufacturing services (EMS)
Sales at the Taiwan components and EMS companies were down -6.5% month-on-month, and below seasonal growth of -2.0% month-on-month. On a year-over-year basis, sales were down -8.1%.
Taiwanese companies that make up the bank’s components and EMS sector analysis include:
- Hon Hai Precision
- Holy Stone
- Phoenix Precision Technology Corp.
- Walsin Technology Corp.
- Pan Jit International, Inc.
- Delta Electronics
- Tripod Technology
- Kinsus Interconnect Technology
- Topoint Technology Co., Ltd.
Underperformance was driven by Hon Hai which accounted for 83% of the segment’s revenues (-8.2% month-on-month, 590bps below seasonal). Excluding Hon Hai, the category would have grown +2.9% month-on-month vs. -1.0% seasonal.
Delta, which represents 9% of the segment’s revenues, saw April sales down 0.8% month-on-month, in line with the bank’s expectations for flattish growth month-on-month.
See the trending chart for components and EMS sales, below.
Looking at the Asia region as it pertains to EMS, according to research firm IDC, the Asia region is holding steady in its share of 73% of EMS industry revenues over the past 5 quarters.
“Reduced spending in consumer devices has restrained expansion of manufacturing in Asia, along with some lower volume / higher mix products shifting back from Asia to near-shore production”, says Michael Palma, Sr. Research Analyst Electronics Manufacturing Services and Consumer Device Semiconductors, IDC.
Taking a look at global EMS on a broader scale, Europe’s share of global EMS revenues, which has been falling over the past 2 years, dropped another point over Q3 and Q4 2008 to 10.5% for Q4.
IDC’s Palma goes on to say that several leading EMS firms with significant operations in Europe have been challenged by slowing markets, especially in the consumer segment and mobile phones.
In other cases, some EMS providers have been right sizing their operations as they react to the recession and have reduced their operations in the region.
Meanwhile, the Americas (thanks to increasing near-shoring) has seen its share of global EMS revenues increase, especially since Q4 of 2007, when the Americas accounted for 15.1%.
In 2008, Americas share has increased to 16.7% in Q3 and then 16.1% in Q4 as seen in Figure 1, ‘EMS Industry Revenues by Region of Origin’, below.
Fig. 1
Foundries
Sales at Taiwan foundries grew 56.2% month-on-month, 55.9 percentage points above seasonal patterns of up +20bps, and year-on-year sales declined 22%.
Taiwanese companies that make up the bank’s foundries sector analysis include:
- Taiwan Semiconductor Manufacturing Corporation
- United Microelectronics
- Vanguard International Semiconductor
See the trending chart for foundry sales, below.
Test and packaging
Sales at the Taiwan test and packaging companies grew 9.6% month-on-month, 12.0 percentage points better than the seasonal pattern of -2.4% month-on-month. On a year-over-year basis, test and packaging sales were down -21.8%, after declining 30% year-on-year last quarter.
Taiwanese companies that make up the bank’s test and packaging sector analysis include:
- Advanced Semiconductor Engineering
- Siliconware Precision
- Powertech Technology
- King Yuan Electronics Co., Ltd.
- Greatek Electronics
- LingSen
See the trending chart for test and packaging sales, below.
Memory
Sales at Taiwan memory companies grew 20.0% month-on-month, 18.9 points above the normal seasonal pattern of +1.1% month-on-month. On a year-over-year basis, memory sales were down -38.9%.
Taiwanese companies that make up the bank’s memory sector analysis include:
- PowerChip
- Nanya Technology
- ProMOS
- Winbond Electronics
- Mosel Vitelic, Inc.
- Etron
- Transcend Information, Inc.
- Inotera Memories, Inc.
See the trending chart for memory sales, below.
Fabless ICs
Sales at the Taiwan fabless IC companies were up 5% month-on-month and were 4.8 points above the normal seasonal pattern of up +0.2% month-on-month. On a year-over-year basis, sales for the fabless IC companies were +5.0%. (Note: MediaTek represents 61% of this segment’s posted revenues)
Taiwanese companies that make up the bank’s fables ICs sector analysis include:
- MediaTek, Inc.
- Novatek Microelectronics Corp., Ltd.
- Sunplus Technology
- Via Technologies
- Silicon Integrated System
- Realtek Semiconductor
- Faraday
- Richtek Technology Corp.
- Global Mixed-Mode Technology
See the trending chart for fables ICs sales, below.
Printed circuit boards (PCB)
Sales at the Taiwan PCB companies were up 1.8% month-on-month and were 5.7 percentage points above the normal seasonal pattern of -4.0% month-on-month. On a year-over-year basis, sales for the PCB companies were down -22.5%.
Taiwanese companies that make up the bank’s PCB sector analysis include:
- Unimicron Technology Corp.
- Compeq Manufacturing Co.
- Wus Printed Circuit Co., Ltd.
- Gold Circuit Electronics
- Chin-Poon
- Unitech Printed Circuit Board Corp.
- Nan Ya Printed Circuit Board
See the trending chart for PCB IC sales, below
Networking
Sales at the Taiwan networking companies (OEM and ODMs) were up -2.9% month-on-month- above the seasonal pattern of -6.0% month-on-month. On a year-over-year basis networking sales were down 15.4%.
Taiwanese companies that make up the bank’s networking sector analysis include:
- D-Link
- Accton Technology Corp.
- CyberTAN Technology, Inc.
- Alpha Networks
- Cameo Communications
- Gemtek Technology
- Abocom
- Z-Com
See the trending chart for networking sales, below.
Motherboards
Sales at the Taiwan motherboard companies were down 15.4% month-on-month and below seasonal trends of -13.3% month-on-month. On a year-over-year basis, motherboard sales were down -17.5%.
For the motherboard business, CreditSuisse Analyst Robert Cheng indicated Asustek expects to see 4.5+ million shipments in 2Q09, implying a 10% quarter-on-quarter drop, which the bank believes is consistent with the industry average.
For the notebook business, the banks feels Asustek expects to ship 900,000 to 1,100,000 units in 2Q09. For the Eee PC 901 laptop business, Asustek plans to ship around 1 million to 1.2 million units in 2Q09. The bank expects the Asustek to ship 1.13 million units of notebooks and 1.08 million units of Eee PCs in 2Q09. It’s also important to note there is some concern with Asustek with regards to Eastern Europe as Company management has witnessed some inventory rebuilding recently.
Taiwanese companies that make up the bank’s motherboards sector analysis include:
- ASUSTek Computer
- Micro-Star International Co.
- Gigabyte Technology Co.
- Elite Group Computer Systems
See the trending chart for motherboard sales, below.
Notebook PCs
Sales at the Taiwan notebook ODM companies were down 8.3% month-on-month and were 10bps above the seasonal pattern of -8.4% month-on-month. On a year-over-year basis, sales were +11.5%.
Taiwanese companies that make up the bank’s notebook PCs sector analysis include:
- Quanta Computer
- Compal Electronics
- Inventec Co., Ltd.
- Wistron
- Catcher Technology
See the trending chart for notebook PC sales, below.
Distribution / retailers
Sales at the Taiwan distributors were -12.5% month-on-month and below the seasonal pattern of – 11.4% month-on-month. On a year-over-year basis, sales were +4.1%.
Taiwanese companies that make up the bank’s distribution / retailers sector analysis include:
- Acer, Inc. / Sertek
- Synnex Technology
- Zenitron
- Yosun Industrial Corp.
- Supreme Electronics
- Edom Technology Co., Ltd.
- Wintek Corp.
- Min Aik Technology
- WPG Holdings, Ltd.
See the trending chart for distribution / retailers sales, below.
Handset components / systems
Sales at the Taiwan handset components / systems were -7.1% month-on-month and below the seasonal pattern of +1.9% month-on-month. On a year-over-year basis, sales were -10.7%.
Taiwanese companies that make up the bank’s handset components / systems sector analysis include:
- Ichia
- High Tech Computer Corp.
- Silitech
- Merry Electronics
- Compal Communications, Inc.
- Largan Precision
- Genius Electronic Optical
See the trending chart for handset components / systems sales, below.
Panel makers / LCS / optoelectronics
Sales at the Taiwan panel makers were up +9.0% month-on-month and slightly below the seasonal pattern of +9.5% month-on-month. On a year-over-year basis, sales were down -37%.
Taiwanese companies that make up the bank’s panel makers / LCS / optoelectronics sector analysis include:
- AU Optronics
- Chi Mei Optoelectronics
- Hannstar Display Corp.
- Wintek Corp.
- InnoLux Display Corp.
- Giantplus Technology Co., Ltd.
See the trending chart for panel makers / LCS / optoelectronics sales, below.
Solar
Sales at the Taiwan solar grew 4.3% month-on-month and were above seasonal patterns of +1.0% month-on-month. On a year-over-year basis, sales were down -23.1%.
Taiwanese companies that make up the bank’s solar sector analysis include:
- E-Ton Solar Tech
- Gintech Energy Corporation
- Sino-American Silicon Products
- Wafer Works Corp.
- Motech Industries
See the trending chart for solar sales, below.
Source: CreditSuisse, VentureOutsource.com, IDC, May 2009
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