CLSA prefers consumer electronics companies

Foreign securities brokerage CLSA Ltd said it favors makers of consumer electronics products, including Hon Hai Precision Industry Co (鴻海精密), among Taiwanese technology stocks, as it expects the proliferation of consumer gadgets such as cellphones to replace computers in fueling growth for the local electronics industry.

Digital televisions, game consoles and handsets are the strongest technologies at the moment, said Cheng Ming-kai (鄭名凱), head of the firm's technology research.

"This year will be a good year for the technology [sector] in general. We are looking for further upside during the rest of the year," Cheng told reporters during a two-day forum in Taipei.

Rising equities prices would be more sustainable despite the short-term shock from soaring energy prices and an appreciating NT dollar, Cheng said.

Demand in the handset, semiconductor and thin-film-transistor liquid-crystal-display (TFT-LCD) industries would likely outpace other industries throughout this year as buyers aggressively build up inventories, he said.

Among CLSA's top picks, mobile phone-related stocks made up a major part of its recommended investment portfolio.

These include Hon Hai, the world's biggest mobile phone maker and its affiliate Foxconn International Holdings Ltd (富士康控股); High Tech Computer Corp (宏達電), the world's top producer of handheld devices based on Microsoft Corp's operating system; and Silitech Technology Corp (閎暉), a keypad supplier.

Cheng expects handset sales this year to grow to around 900 million units.

CLSA's optimism is built on global electronics companies' fast-growing production outsourcing to Asia, particularly Taiwan, in the recent two years.

While Cheng foresees stronger performance from downstream electronics industries, he still expects growth from upstream semiconductor producers such as Taiwan Semiconductor Manufacturing Co (台積電) given its high and rising utilization rate.

He said some inventory was built, but would not pose a serious problem for chipmakers as it did during the last downturn.

Local chip designer Mediatek Inc (聯發科), which diversified to chips used in digital TVs from DVD chips, and recently listed Nan Ya Printed Circuit Board Corp (南亞電路板) would benefit from the growing adoption of consumer electronics such as digital TVs and game consoles in the upcoming years, according to the brokerage house.

Computer power supply system maker Delta Electronics Inc (台達電), light-metal casing supplier Foxconn Technology Co (鴻準) and camera lens manufacturer Largan Precision Co (大立光) are also on CLSA's buying list.