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Income of nation's top firms set to fall

The aggregate net income of the nation's top 50 companies is expected to fall a modest 3 percent this year, dragged down for the first time by poorer earnings from traditional firms, according to Taiwan Ratings Corp (中華信評).

"In contrast to last year, the weaker performance [this year] is likely to result from sharply lower earnings in `old economy' sectors, including oil, chemicals, shipping, steel and power, as a result of falling margins and rising costs," Taiwan Ratings said in a report released last week.

The report was Taiwan Ratings' third annual survey of the nation's top 50 firms, and it is once again dominated by high-tech firms, which took 28 spots.

For the first time in six years, high-tech companies look set to report higher cumulative net income -- at 62 percent of total income -- compared to traditional companies' 38 percent, thanks to stronger industry growth and demand, the survey said.

Last year, a weaker overall performance in high-tech sectors, especially TFT-LCD panels and semiconductors, caused the aggregate net income of the top 50 corporations to slump 17 percent year-on-year to NT$620.6 billion (US$19 billion), it said.

According to Taiwan Ratings, the median sales and earnings of electronic contract manufacturers -- with Hon Hai Precision Industry Co (鴻海精密) in the lead -- registered the highest growth rates of all sectors last year, boosted by strong competitiveness and increased outsourcing.

But the motherboard sector's median operating margin -- which dropped to 4.9 percent last year from 14.6 percent in 2001 -- registered the sharpest decline among all sectors covered in the report.

"The motherboard sector has suffered from severe pricing pressure over the past few years because of product commoditization and intense market competition," Taiwan Ratings said.

Although all Taiwanese motherboard manufacturers have tried to diversify their product lines, only the largest maker Asustek Computer Inc (華碩電腦) has enjoyed a considerable measure of success, it said.

Meanwhile, High Tech Computer Corp (HTC, 宏達電), the world's biggest maker of phones operating on Microsoft Corp's operating system, is a rapidly rising star which entered the top 50 list for the first time.

“Strong design capability and reliable product quality have enabled HTC to charge premium prices. As a result, it has bucked the industry trend of sacrificing margins to catalyze sales growth,” Taiwan Ratings said.

The company's operating margin further strengthened to an impressive 23 percent in the first quarter this year, from 18 percent last year, and 13 percent in 2004, it said.
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