China slowdown drags on Taiwan tech sales in March
Unfavorable forex and weak iPhone 7 demand also hurt
CHENG TING-FANG, Nikkei staff writer
TAIPEI -- Sales at Taiwan's major tech companies decelerated sharply in March, pressured by a slowdown in Chinese smartphone makers and an unfavorable foreign exchange rate for the export-reliant electronics sector.
Total revenue of the 19 tech companies monitored by Nikkei Asian Review went up 2.67% from a year ago to 885.5 billion New Taiwan dollars ($28.97 billion) in March, slowing substantially from the more than 12% growth year-over-year in February. In March, 11 out of 19 major tech companies reported a sales increase from a year ago, compared with 18 in February.
Overall, Taiwan's exports also slowed, rising just 13.2% year-on-year in March, from 27.7% in February.
"The major factor that led to a growth deceleration in March is the strong Taiwanese dollar and the substantial slowdown in orders from Chinese device-makers," said Jeff Pu, an analyst at Yuanta Investment Consulting.
Pu said weakening demand for the iPhone 7 range also hurt sales at Apple suppliers. Revenues at major Apple suppliers on NAR's watch list together increased less than 1% in March from a year ago.
Key iPhone assembler Hon Hai Precision Industry, also known as Foxconn Technology Group, saw sales rise 0.61% year-on-year to NT$341.69 billion in March while the revenue of its smaller rival Pegatron dropped 16.87% from a year ago to NT$74.29 billion.
Sales of Catcher Technology, a major metal casing provider to Apple, declined nearly 23% last month. Pegatron and Catcher both mainly supply for the smaller 4.7-inch iPhone 7 model that reported lukewarm demand and saw their quarterly revenue dwindle from a year ago.
In March, sales of Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker and key supplier for iPhone core processors, advanced 17.5% to NT$85.87 billion from a year ago. For the first quarter, the chipmaker generated NT$ 233.91 billion in sales, up 14.9% year-over-year.
However, TSMC's quarterly revenue missed the company's guidance of NT$236 billion--NT$239 billion in January, hit by the strong Taiwanese dollar and more tepid-than-expected demand from Chinese smartphone makers. The unfavorable exchange rate in January-March period also caused some NT$6 billion in losses, the company said.
For the first three months of this year, the Taiwanese dollar advanced around 6% against the U.S. dollar which hurt many exporters.
TSMC also supplies to MediaTek, the largest mobile chip provider to China, Huawei Technologies' chip design arm Hisilicon Technologies, Beijing-backed Spreadtrum Communication, among others.
In March, MediaTek's revenue decreased 2.43% from a year ago, weighed down by lower orders from most Chinese customers such as Huawei, Oppo, Vivo amid fierce competition from Qualcomm of the U.S. For the three months ending in March, MediaTek's sales was almost flat as a year ago.
Some big gainers in the month were panel and dynamic random access memory, or DRAM, makers. DRAM is a key component used in personal computers and mobile devices.
Innolux, a Foxconn subsidiary, and AU Optronics continued to benefit from Samsung Electronics' decision last year to close its liquid crystal display facilities to concentrate on the development of advanced organic light-emitting display technology, which is set to be adopted by the iPhone's 10th anniversary edition this year.
Innolux's sales advanced 67.63% in March as its revenue in the same period in 2016 was seriously affected by an earthquake. AU Optronics also saw revenue grow 18.19% year-over-year last month. For the first quarter, Innolux and AU Optronics expanded 52.5% and 24.5% respectively from a year-ago period.
Revenue of DRAM supplier Nanya Technology increased more than 27% last month thanks to robust demand and rising memory chip prices. The company's sales also advanced 17.63% last quarter.
"For this year, the overall semiconductor market is expected to post robust double-digit growth and the key growth driver will mainly come from memory chip side including DRAM and NAND flash memory chips," said Jerry Peng, an analyst at Industrial Economics and Knowledge Center.