January 11, 2017 9:28 pm JST

Taiwan tech sales rebound 5% in December

Chip sector leads rise, but full-year revenue is down due to weak iPhone demand

CHENG TING-FANG, Nikkei staff writer

Morris Chang, chairman of TSMC (Photo by Shinya Sawai)

TAIPEI -- Taiwan's major tech companies, a gauge of global electronic market conditions, reported that sales rebounded more than 5% in December despite a decline for the whole of 2016.

In December, 15 out of 19 major tech companies on the Nikkei Asian Review's Asia 300 watch list reported an increase in sales from a year ago, and 11 of them even grew by double digits. This improvement compares with a year-on-year dip of 0.4% in November.

The December recovery was in line with the 14% annual rise in the trade-reliant island's exports in December, although the figure was still down for all of 2016.

For the full year, the 19 companies on NAR's watch list posted a combined revenue of 10.72 trillion New Taiwan dollars ($336.26 billion), a 3.5% drop from a year ago in large part due to a slowdown in Apple's iPhone sales and a saturated smartphone market. By contrast, the combined revenue of these companies rose 4.72% in 2015 and 8.79% in 2014, respectively.

Since the launch of the first iPhone model in 2007, Taiwan's tech sector had grown substantially from supplying parts to Apple, said Gordon Sun, an economist at Taiwan Institute of Economic Research.

"However, this major driver has somehow disappeared in 2016 as the U.S. titan stopped bringing out eye-popping innovations, and we don't think there will be such explosive growth for Taiwanese suppliers later," Sun said.

The strong recovery in December was mainly due to a low base in 2015, according to Sun, adding that figures for the first half of 2017 are likely to reflect expansion for the same reason.

Among all, chip manufacturers were the best performers. In December, the revenue of all five semiconductor companies on NAR's watch list gained 25.7% year-on-year.

Recovery mode

"Taiwan's semiconductor sector is on the path to recovery ... we are positive that growth for overall chip companies can continue into the first half 0f 2017, but we are a bit cautious about the second half of the year as the base of 2016 was already a bit high," said Rick Hsu, an analyst at Daiwa Capital Markets.

Taiwan Semiconductor Manufacturing Co., the world's largest contract chipmaker, posted a record sale of NT$947.93 billion in 2016, up 12.4% from a year ago. This is largely due to the fact that it is the main manufacturer of the core processors for the iPhone 7 range. Robust demand from major clients such as Nvidia and MediaTek also helped.

In December, TSMC's sales rose 33.9% to NT$78.11 billion. Its smaller rival United Microelectronics reported that revenue also increased by 17.6% to NT$12.55 billion.

MediaTek, the largest mobile chip provider to China, has seen its revenue surge more than 29% to a historic high of NT$275.51 billion in 2016 too. In December, sales for the chip designer expanded more than 15% to NT$21.35 billion.

However, MediaTek faces stiff competition from the U.S. chip giant Qualcomm in the first half of 2017, said Daiwa's Hsu. He added that the Taiwanese chip designer would focus less on gaining market share and more on improving margins in 2017.

Hsu said 2017 could be a tough year for UMC as the Chinese no.1 contract chipmaker Semiconductor Manufacturing International Co. has upped its game.

December improvement

For full-year 2016, poor performance at the nine major Apple suppliers on NAR's list dragged down the Taiwanese tech sector. In December, sales for some of them did improve to mark a combined expansion of 3.86% year-over-year.

In December, key iPhone assembler Hon Hai Precision Industry, also known as Foxconn Technology Group, posted a 9.76% rise in sales, thanks to relatively robust demand for the 5.5 inch iPhone 7 Plus model. Its smaller rival Pegatron, however, had a bad month, with sales plunging 27.36% year-over-year. This was due to the fact that it mainly assembles the iPhone 7 model, which has not been well-received.

Quanta Computer, a key maker of Apple's MacBook, and Catcher Technology, Apple's metal casing supplier, both saw sales climb 7.78% and 10.32% respectively in December. Largan Precision, Apple's camera lens provider, said that sales surged 36.87% in the same month from a year ago.

For the whole of 2016, Foxconn sales fell 2.81% to NT$4.35 trillion, its first annual decline since it went public in 1991. Pegatron's revenue was also down 4.57% at NT$1.15 trillion for the same period.

Quanta, Catcher and Largan's revenue for 2016 tumbled 11%, 4% and 13% respectively to NT$893.99 billion, NT$79.11 billion and NT$48.35 billion from a year ago.

"Looking into 2017, Cather could face unprecedented challenges as the metal casing provider only gained orders from the smaller-screen iPhone 8 model, for which we expect demand to be low," said Yuanta's Pu.

Furthermore, the iPhone 8 range is expected to spot glass backs with metal frames, which could mean that sales for Catcher in 2017 could suffer, according to Pu.

Asia300

Taiwan Semiconductor Manufacturing Co., Ltd.

Taiwan

Market(Ticker): TAI(2330)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 185,591M
Shares: 25,930.38M
Asia300

MediaTek, Inc.

Taiwan

Market(Ticker): TAI(2454)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 14,072.08M
Shares: 1,581.60M
Asia300

United Microelectronics Corp.

Taiwan

Market(Ticker): TAI(2303)
Sector:
Industry:
Electronic Technology
Semiconductors
Market cap(USD): 5,139.50M
Shares: 12,624.31M
Asia300

Hon Hai Precision Industry Co., Ltd.

Taiwan

Market(Ticker): TAI(2317)
Sector:
Industry:
Electronic Technology
Computer Peripherals
Market cap(USD): 64,004.56M
Shares: 17,328.73M
Asia300

Pegatron Corp.

Taiwan

Market(Ticker): TAI(4938)
Sector:
Industry:
Electronic Technology
Computer Processing Hardware
Market cap(USD): 8,225.01M
Shares: 2,574.73M
Asia300

Catcher Technology Co. Ltd.

Taiwan

Market(Ticker): TAI(2474)
Sector:
Industry:
Producer Manufacturing
Metal Fabrication
Market cap(USD): 9,257.28M
Shares: 770.39M
Asia300

Quanta Computer, Inc.

Taiwan

Market(Ticker): TAI(2382)
Sector:
Industry:
Electronic Technology
Computer Processing Hardware
Market cap(USD): 9,105.39M
Shares: 3,862.62M
Asia300

LARGAN Precision Co., Ltd.

Taiwan

Market(Ticker): TAI(3008)
Sector:
Industry:
Electronic Technology
Electronic Components
Market cap(USD): 21,535.71M
Shares: 134.14M

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