Taiwanese passive component manufacturers should continue to seek to join the Samsung Electronics Co and Apple Inc supply chains, or actively enter automobile electronics to hedge against the negative outlook for the passive component industry, an industrial analyst said.
“The global passive component market is unlikely to return to the growth path because sales of consumer electronics have been adversely affected by the persistent eurozone debt crisis and weak job outlook in the US and European counties,” Industrial Economics & Knowledge Center (IEK) analyst Jeremy Tung (董鍾明) said in a report released recently.
The global market for passive components this year will decline 10.9 percent from last year to about US$20.18 billion, and the shipments will decrease 7 percent year-on-year to 2.73 trillion units, Tung said.
Of the shipments, passive components for smartphones and notebook computers would account for about 20 percent and 10 percent respectively, while passive components for tablet computers would account for between about 5 and 6 percent, he added.
Taiwanese passive component makers are not immune to the unstable macoeconomic environment, Tung said. He predicted that Taiwan’s passive component market would drop 10 percent to about NT$100 billion (US$3.39 billion) this year from last year.
In the first quarter, the number of Taiwanese passive component manufacturers posting gross margins between 10 percent and 20 percent remained flat, while the number of companies with gross margins at 20 percent dropped 33 percent, Tung said.
The number of companies with less than 10 percent in gross margins grew 66 percent from a year earlier, he said.
The changes indicated that local passive component manufacturers would face big challenges this year, Tung said.
Taiwanese producers must find their own way to break away from the unfavorable environment, Tung said.
Smartphones, notebook PCs, Ultrabooks, car electronics and conductive polymer capacitors would be the areas that offer opportunities for local makers to grow, Tung said.
Tung suggested Taiwanese manufacturers continue to seek partnerships with Samsung and Apple in the smartphone market.
Also, passive components are increasingly used in automotive applications in recent years and the average cost of electronic devices in a car accounts for more than 40 percent of the total cost, which would provide an opportunity for local firms to grow their profits because of higher prices, Tung said.
Taiwanese producers have also continued to expand into the markets for conductive polymer capacitors for applications on desktop PC motherboards, notebook computers, game consoles and home theaters, he said.
To improve profitability, local companies should enhance their ability to make raw materials in-house, reducing reliance on Japanese suppliers for supply, he said.
Currently, 70 percent of raw materials come from Japan, he said.