Local industrial automation (IA) makers might find it difficult to fully utilize the capacity they built up during a previous upcycle in the sector, leading to more pricing competition and gross margin pressure ahead, Yuanta Securities Investment Consulting Co (元大投顧) said in a recent report.
Key IA demand drivers continue to weaken and the US-China trade dispute remains unsettled, while manufacturers hold excess inventories that could take several quarters to digest, so local manufacturers would likely see increased downside risks to their earnings this year, Yuanta analyst Steve Huang (黃柏璁) said in a research report released on Jan. 9.
Strong demand from the smartphone, automotive and electronic equipment segments, as well as expectations among manufacturers of component shortages and price hikes, helped launch the IA sector’s previous upcycle that began from the start of 2016 and ran through early last year, the report said.
Major vendors in the IA space — including Advantech Co (研華), Ennoconn Corp (樺漢), Hiwin Technologies Co (上銀), Delta Electronics Inc (台達電), Airtac International Group (亞德客), Chroma ATE Inc (致茂) and Adlink Technology Inc (凌華) — benefited from the upcycle in terms of sales, earnings and share prices, but they were also overstretched, the report said.
However, IA firms face multiple headwinds this year, the report said, citing lower forecast smartphone sales after Apple Inc lowered its quarterly revenue guidance, worries about possible tariffs on cars, slowing electronic equipment demand amid capital expenditure cuts in the technology sector and slowing Chinese economic growth.
“We are cautious on the whole IA sector and believe that the next upcycle could take time to cultivate,” Huang said.
Over the past few years, major manufacturers of electronic devices, including semiconductors, have invested heavily in automation to boost productivity and reduce costs, Yuanta said.
Now, a number of them are considering relocating their plants away from China to maintain their competitiveness in the wake of US tariffs on Chinese goods, it said.
However, Yuanta’s own supply-chain checks suggest that most relocation plans are still in the discussion stage, as it is still unclear how China and the US will settle their dispute, the report said.
“Even if fab relocation plans are executed immediately, sales contribution may not materialize until two to three years later, as manufacturers’ land hunting, environmental evaluations, government approval and new fab construction all take time to complete before equipment moves in,” Huang said.
Among the sector’s players, Advantech and Chroma’s businesses are more customized and thus less susceptible to double-booking problems, he said
The two firms also focus more on emerging technologies, such as the Internet of Things, electric vehicles, artificial intelligence and 5G, on which capital expenditures are expected to remain stable, he said.
Advantech reported record-high consolidated revenue of NT$48.78 billion for last year, up 9.92 percent from 2017, while Chroma's revenue increased 13.62 percent to NT$16.93 billion, companies' data showed.
Shares in Advantech have risen 9.74 percent so far this year and Chroma shares have advanced 5.93 percent, compared with a 2.49 percent increase in the broader market over the period.
SEMICONDUCTOR SERVICES: A company executive said that Taiwanese firms must think about how to participate in global supply chains and lift their competitiveness Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday said it expects to launch its first multifunctional service center in Pingtung County in the middle of 2027, in a bid to foster a resilient high-tech facility construction ecosystem. TSMC broached the idea of creating a center two or three years ago when it started building new manufacturing capacity in the US and Japan, the company said. The center, dubbed an “ecosystem park,” would assist local manufacturing facility construction partners to upgrade their capabilities and secure more deals from other global chipmakers such as Intel Corp, Micron Technology Inc and Infineon Technologies AG, TSMC said. It
EXPORT GROWTH: The AI boom has shortened chip cycles to just one year, putting pressure on chipmakers to accelerate development and expand packaging capacity Developing a localized supply chain for advanced packaging equipment is critical for keeping pace with customers’ increasingly shrinking time-to-market cycles for new artificial intelligence (AI) chips, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) said yesterday. Spurred on by the AI revolution, customers are accelerating product upgrades to nearly every year, compared with the two to three-year development cadence in the past, TSMC vice president of advanced packaging technology and service Jun He (何軍) said at a 3D IC Global Summit organized by SEMI in Taipei. These shortened cycles put heavy pressure on chipmakers, as the entire process — from chip design to mass
People walk past advertising for a Syensqo chip at the Semicon Taiwan exhibition in Taipei yesterday.
NO BREAKTHROUGH? More substantial ‘deliverables,’ such as tariff reductions, would likely be saved for a meeting between Trump and Xi later this year, a trade expert said China launched two probes targeting the US semiconductor sector on Saturday ahead of talks between the two nations in Spain this week on trade, national security and the ownership of social media platform TikTok. China’s Ministry of Commerce announced an anti-dumping investigation into certain analog integrated circuits (ICs) imported from the US. The investigation is to target some commodity interface ICs and gate driver ICs, which are commonly made by US companies such as Texas Instruments Inc and ON Semiconductor Corp. The ministry also announced an anti-discrimination probe into US measures against China’s chip sector. US measures such as export curbs and tariffs
RSS