Rising inflation combined with high inventory could create a painful trap for Taiwanese manufacturers, Qisda Corp (佳世達) chairman Peter Chen (陳其宏) said yesterday as the electronics manufacturer reported that consumer demand had begun to flag by the third quarter.
Consumer demand would soften in the fourth quarter, Chen said, giving a cautious outlook for Qisda, whose products include LCD monitors, projectors, networking devices, medical equipment and smart business solutions.
“The latest consumer price index from the US shows that inflation there reached 6.2 percent last month, while in Taiwan it is about 2.6 percent,” Chen told an investors’ conference in Taipei. “Prices are rising for everything — from components to street food.”
Photo: Chen Mei-ying, Taipei Times
“If consumers feel tight on money, they will not make big-ticket purchases and might even put off upgrades,” he said.
Qisda’s third-quarter profit slid 32 percent year-on-year to NT$1.4 billion (US$50.33 million).
In the first three quarters, net profit increased 127 percent to NT$7.31 billion, or earnings per share of NT$3.72, company data showed.
As many other companies reported rising revenue, but falling profit, last quarter, the situation might continue or even worsen this quarter, Chen said.
Taiwanese manufacturers might be lulled into a false sense of security, with more orders in hand than they can fulfill, he said.
However, many of those orders might turn out to be “overbooking” rather than true demand, he said.
“If a customer placed an order for 10,000 units and only received half, they might be tempted to double or even triple the order the next month and stockpile the items, but as soon as demand is satisfied, those orders would be slashed again,” Chen said.
A semiconductor shortage has left Taiwanese manufacturers with high inventories that they cannot ship because they lack one or two key components, he said.
Lower-end components, which are widely used in the automotive industry, are especially scarce, Chen said, adding that some components would remain in short supply throughout next year.
Supply chain firms in Taiwan must exercise good inventory control, he said.
“An orderly drawing down of component inventories will minimize the pain,” he said. “The fourth quarter can be a very dangerous time. Anybody sitting on too much inventory can be seriously hurt.”
Looking forward to next year, Chen said that hopefully Qisda’s non-monitor sales would overtake its monitor business.
It has been “eight years of struggle” for Qisda to diversify away from the monitor market, which he described as “a roller-coaster ride.”
High-value-added business, which includes medical, artificial intelligence of things and network equipment, accounted for 41 percent of sales in the first three quarters, he said.
“We have helped the top breakfast food chain in Taiwan cut its IT department by 80 percent,” Qisda head of business solutions Michael Lee (李昌鴻) said. “Our AI solutions help businesses prepare for inventory ahead of time, like little elves who help you do chores in the night,” Lee said.
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