Taiwanese technology firms to have a more profitable second half, UBS says

By Crystal Hsu  /  Staff reporter

Fri, Jun 27, 2014 - Page 13

Taiwan’s technology firms may fare better moving forward, compared with the first half of the year, driven by inventory replenishment and improved end-demand, as Apple Inc is expected to launch next-generation devices next quarter, UBS Securities said yesterday.

The technology sector, which has seen only a limited pickup in business in the past few years, may end with results on a par with a high season this year, thanks to recouping economic fundamentals in the US and Europe, the Swiss brokerage said on the sidelines of the annual Taiwan Conference, a major event for institutional investors.

“We believe a further increase in seasonal inventory will serve as the next catalyst, especially with the long-expected launch of the next-generation iPhone next quarter,” UBS Taipei-based equities and research head William Dong (董成康) told a media briefing.

Dong kept his forecast for TAIEX unchanged at 9,650 at the year-end, but added the main index may rise above the target during trading sessions next quarter as the new iPhones draw closer to hitting the shelves.

UBS is positive on the camera lens and metal casing sub-sectors given the increasing adoption of innovative new designs such as 3D effects and thinner form factors, electronics hardware lead analyst Arthur Hsieh (謝宗文) said.

“Even though global growth in smartphone shipments could decelerate due to high penetration, opportunities still exist for middle-priced devices, which is attributable to the emergence of the super-mid market,” Hsieh said.

Smartphone camera lens supplier Largan Precision Co (大立光) maintains competitive advantages over its Chinese rivals which are aggressively trying to catch up, Hsieh said.

PC shipments could be higher than expectations (since most people remain skeptical on the sustainability of the recovery) and the increasing appeal of the products should help boost demand, Hsieh said.

UBS shares the belief in business potential linked to the “Internet of Things” (IoT), but has yet to spot an industry standard or a convincing application as of now which would drive immediate demand.

The “Internet of Things” has been a buzz concept encompassing wearable computing devices, smart home-appliances and cloud computing analytical services, UBS technology sector analyst Samson Hung (洪希民) said. However, investors are watching developments from the sidelines and expect the impact on different industries to become more apparent in a couple of years, he said.

“We expect IoT to drive specific industries, such as smart control systems and semiconductors, when the specifics of wearable devices, sensors and chips are developed further,” Hung said.

UBS is optimistic about the growth of the LED industry that has seen a better balance between supply and demand, Hung said, adding that smart lighting is expected to be the next focus of the industry.

Meanwhile, Paul Donovan, senior global economist at UBS Investment Bank, told reporters that he holds a “relatively optimistic” view on the global economy this year, forecasting that the US economy will grow 2.5 percent this year and the eurozone 1 percent.

“Those two economies [the US and Europe] matter a great deal to Taiwan because we are looking for exports from Taiwan to America [and] to Europe to provide support for Taiwanese GDP this year,” Donovan said.

He forecast Taiwan’s GDP will grow 4 percent this year based on strong export growth along with “a reasonably good level” of domestic consumer spending, which will be helped by a relatively strong labor market and recent wage increases in Taiwan.

Additional reporting by CNA