Asian PC-related companies send mixed messages

Kyocera Corp President Yasuo Nishiguchi is confident of one thing -- demand for components is up, leaving some of his company's cellular-phone parts factories at full capacity. Ask about the second half and he's less sure.

"We're doing our best to boost earnings in the first half," Nishiguchi said in an interview last week. "I'm not at ease" with the estimate that second-half profit will surge at Kyocera, the No. 1 maker of ceramic packaging for semiconductors.

Nishiguchi is not alone with doubts about the next six months. Murata Manufacturing Co, the biggest maker of ceramic capacitors used to regulate electricity flow in cell phones, last month said parts prices may drop 10 percent this year. Meanwhile, memory-chips are selling at about US$2.50, more than 40 percent lower than their March peak.

"The signals are still very mixed for the second half of the year," said Choo Shou-pin, a technology fund manager at UBS Asset Management, which manages US$400 billion worldwide. "There is basically no concrete evidence" of a recovery.

Promises of a rebound at Asia's parts suppliers have been made in the past, only to see a slew of lowered earnings forecasts at the companies that use the region's components.

Apple Computer Inc this month said sales and profit for the third-quarter won't meet its expectations. Nokia Oyj, the world's largest mobile-phone maker, cut its sales forecast, saying second-half revenue will rise no more than 10 percent.

The maker of the iMac computer and Finland-based Nokia get many of the parts that go into their mobile phones and computers from Asia, leaving component makers like Kyocera vulnerable when sales slow at their main customers.

Some, such as Kyocera and Taiwan Semiconductor Manufacturing Co (台積電), have said sales are rising on pace with or above targets.

Others, such as Benq Corp (明基電通), Taiwan's biggest cell-phone maker, may see earnings fall as Intel Corp and Nokia's estimated demand for computers and handsets lags forecasts.

"The technology industry is showing the first tentative signs of a recovery," Standard & Poor's said in a report this week. "However, the recovery in 2002 is only expected to be moderate."

Even Kyocera, whose sales are rising faster than expected, says its windfall may be misleading because consumers aren't actually interested in buying more phones and computers. Much of the increase in demand comes after customers worked down inventories, meaning growth may not be sustainable, Kyocera said.

Companies such as Nokia stopped or slowed buying more parts last year because they had more inventory than they could sell. Now they need to buy more components to start making phones again as their inventory slowly gets sold off.

While the company now expects to exceed fiscal first-quarter sales forecasts, Nishiguchi said he is uneasy about forecasts that profit will surge in the second half of the year.

Investors seem to agree. The MSCI Asia Information Technology index of 120 stocks has declined about 13 percent since April 24. Chip stocks are faring little better. The Bloomberg Asia-Pacific Semiconductors Index has declined 11 percent since Jan. 1.

"The feeling among investors is that surely April to June demand was good but things may not be as rosy in the July to September quarter and afterwards," said Satoshi Kobayashi, a fund manager at Baring Asset Management (Japan) Ltd, which manages 430 billion yen (US$3.6 billion), including Kyocera.