The local semiconductor industry is expected to face earnings challenges in 2025 as profit growth is likely to peak this year, the Taipei-based China Credit Information Service Ltd (CCIS, 中華徵信所) said in a report on Tuesday last week.
Industry profit declines are to become more apparent in 2025 as the US, Europe, South Korea and Japan, which compete with Taiwan in the semiconductor industry, are scheduled to fulfill their expansion plans by that year as they strive for a higher share of the global semiconductor market, the report said.
Additionally, China is expected to reduce its dependence on Taiwan’s semiconductor exports, which would further affect local export earnings, it said.
Photo: Bloomberg
As Taiwanese semiconductor firms incur higher investment costs in their overseas expansion, the industry is expected to see slowing profit growth, it added.
However, CCIS said that old economy industries — such as textile firms, electric equipment suppliers and machinery makers — performed better in the first half of this year, compared with the same period last year.
Taiwan’s technology sector is expected to benefit from the launch of the iPhone 14 and a booming global electric vehicle market in the second half of this year, it said.
The CCIS report showed that the local manufacturing sector posted its highest profit margins in 10 years last year, and the uptrend is expected to continue this year despite several uncertainties, including skyrocketing global inflation, a rate hike cycle launched by the US Federal Reserve, the war in Ukraine and an economic slowdown in China.
The local manufacturing sector’s gross margin rose to 12.4 percent last year from 10.2 percent in 2020, while its operating margin increased to 7.8 percent from 5.1 percent, the report said.
Net margin also rose to 11.3 percent from 8.0 percent in 2020, it added.
The optoelectronics and precision equipment industry last year had the highest gross margin at 30.9 percent, marking the fourth consecutive year it has finished on top, CCIS said.
The rubber and plastics, non-metal mineral, agriculture and food, and machinery industries took second to fifth place at 26.4 percent, 20.57 percent, 20.24 percent and 19.8 percent respectively, it said.
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