With demand for smartphones and personal computers declining, large outsourced semiconductor assembly and test (OSAT) companies should fare better than their smaller rivals because of their better technological capabilities, more diversified product portfolios and financial flexibility on research and development, Fitch Ratings said.
The industry could see a short-term recovery in revenue after a severe downturn in the first half of this year, thanks to the arrival of new-generation smartphones and better demand for wearables and automotives, the international ratings agency said.
Larger firms, such as Taiwan’s ASE Technology Holding Co (ASE, 日月光投資控股) and US-based Amkor Technologies, should see faster growth and gain market share at the expense of Chinese rivals Jiangsu Changjiang Electronic Technology (江蘇長電科技) and Singapore’s Global A&T Electronics Ltd, it said.
Larger chip assembly and test companies have conservative leverage and have been diversifying to offer new products, such as wearables, automotive and Internet of Things, where demand is growing rapidly, it said.
These new products should make bigger contributions to revenues, Fitch said, adding that small consumer electronics and flexible hardware, such as foldable phones, would give large OSAT companies an advantage, as they possess the technological edge in system-in-package (SiP) and advanced packaging technologies.
Global smartphone sales are forecast to shrink 2.5 percent this year due to saturation in developed markets, an extended replacement cycle and a lack of eye-catching features in new models, Fitch said, citing figures from US technology research body Gartner.
PC shipments are likely to stagnate, in line with the previous eight years, it said.
OSAT companies rely heavily on the smartphone segment to drive revenue, Fitch said.
The ongoing US-China trade dispute and restrictions on US companies selling software and hardware to China’s Huawei Technologies Co (華為) could affect the financial recovery of Chinese OSAT firms in the near term, it said.
However, Taiwanese OSAT companies could emerge unscathed given their limited manufacturing activity in China, but they might still be indirectly affected by lower demand from US-based customers that are exposed to Huawei, it said.
Challenging conditions for the OSAT industry would last into next year, it said.
Most OSAT companies plan to boost capacity on expectations of businesses linked to 5G-ready handsets, but a concrete pickup in demand seems unlikely, as 5G coverage remains patchy in the UK, the US, Australia and other large markets, Fitch said, adding that China would start to roll out 5G next year.
Large OSAT firms would be at the forefront of 5G-related demand, as their advanced packaging capabilities are suited to 5G chips, Fitch said.
A protracted industry slowdown could hit smaller OSAT companies with less than 5 percent market share such as Powertech Technology Inc (力成科技), ChipMOS Technologies Inc (南茂) and Chipbond Technology Corp (頎邦).
They could seek merger and acquisition opportunities to expand their scale and strengthen their market positions, Fitch said.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) last week recorded an increase in the number of shareholders to the highest in almost eight months, despite its share price falling 3.38 percent from the previous week, Taiwan Stock Exchange data released on Saturday showed. As of Friday, TSMC had 1.88 million shareholders, the most since the week of April 25 and an increase of 31,870 from the previous week, the data showed. The number of shareholders jumped despite a drop of NT$50 (US$1.59), or 3.38 percent, in TSMC’s share price from a week earlier to NT$1,430, as investors took profits from their earlier gains
In a high-security Shenzhen laboratory, Chinese scientists have built what Washington has spent years trying to prevent: a prototype of a machine capable of producing the cutting-edge semiconductor chips that power artificial intelligence (AI), smartphones and weapons central to Western military dominance, Reuters has learned. Completed early this year and undergoing testing, the prototype fills nearly an entire factory floor. It was built by a team of former engineers from Dutch semiconductor giant ASML who reverse-engineered the company’s extreme ultraviolet lithography (EUV) machines, according to two people with knowledge of the project. EUV machines sit at the heart of a technological Cold
Taiwan’s long-term economic competitiveness will hinge not only on national champions like Taiwan Semiconductor Manufacturing Co. (TSMC, 台積電) but also on the widespread adoption of artificial intelligence (AI) and other emerging technologies, a US-based scholar has said. At a lecture in Taipei on Tuesday, Jeffrey Ding, assistant professor of political science at the George Washington University and author of "Technology and the Rise of Great Powers," argued that historical experience shows that general-purpose technologies (GPTs) — such as electricity, computers and now AI — shape long-term economic advantages through their diffusion across the broader economy. "What really matters is not who pioneers
TAIWAN VALUE CHAIN: Foxtron is to fully own Luxgen following the transaction and it plans to launch a new electric model, the Foxtron Bria, in Taiwan next year Yulon Motor Co (裕隆汽車) yesterday said that its board of directors approved the disposal of its electric vehicle (EV) unit, Luxgen Motor Co (納智捷汽車), to Foxtron Vehicle Technologies Co (鴻華先進) for NT$787.6 million (US$24.98 million). Foxtron, a half-half joint venture between Yulon affiliate Hua-Chuang Automobile Information Technical Center Co (華創車電) and Hon Hai Precision Industry Co (鴻海精密), expects to wrap up the deal in the first quarter of next year. Foxtron would fully own Luxgen following the transaction, including five car distributing companies, outlets and all employees. The deal is subject to the approval of the Fair Trade Commission, Foxtron said. “Foxtron will be
RSS