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Outlook good for high-tech materials

The nation's upstream high-tech companies could outperform downstream industries in the next six months or even longer because of the growth in outsourcing orders, industry insiders said yesterday.

"The strength of the market over the next six months, or probably longer than that, is not so much for downstream system makers, but rather the upstream material makers ... including semiconductor, memory [chips] in particular," said Peter Kurz, chief executive officer of Insight Pacific Research (月涵投顧).

Kurz, also known as Mr. Taiwan, made the remarks at a luncheon on short-term prospects for Taiwan's high-tech industry held by The European Chamber of Commerce Taipei (ECCT).

The economic recovery in the US will prompt companies to increase their orders from Taiwanese companies based in China, he said, adding that 60 percent to 70 percent of electronics exports from China are made by China-based Taiwanese companies.

China has abundant and cheap labor, which is beneficial for raw materials makers, including basic materials and upstream suppliers for electronics such as DRAM manufacturers, Kurz said.

James Carroll, head of ING Financial Markets' Taiwan research unit, said Taiwan's high-tech sector may be hurt by currency fluctuations, as both the New Taiwan dollar and the Chinese yuan are undervalued.

As a result, investors should diversify their portfolios by lowering investments in high-tech stocks to 50 percent, said Francis Yu (於怡勳), head of equities and branch manager of UBS Securities Taiwan.

Taiwan's high-tech sector would benefit from direct links across the Taiwan Strait that would increase economic ties and accelerate Taiwan's economic growth, Carroll said.

In addition, "Signing investment agreements with China could help Taiwanese companies list assets in both Taiwan and China, and the leverage of this would be a huge potential for the Taiwan market," he said, adding that the move could also increase transparency for investors.

While Asustek Computer Inc (華碩電腦), the world's biggest motherboard maker, is planning to build a production and service facility in the Czech Republic, Kurz said Europe is a growing but still fragmented market for Taiwanese high-tech companies like motherboard makers.

Exports to Europe have remained steady at around 15 percent of Taiwan's total exports, while those to China have risen to around 37 percent and those to the US declined to around 15 percent, he said.
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