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Soft demand for iPhone X dents Taiwan tech sales

First year-on-year decline in 15 months for 19 IT companies

iPhone X on display in Tokyo (Photo by Mamoru Yago)

TAIPEI -- The revenue of major Taiwanese tech companies declined year-on-year for the first time in 15 months in February, hit by lackluster iPhone X demand, a slowing mobile market and fewer working days due to a shorter month and the Lunar New Year break.

Overall sales of the 19 tech companies monitored by the Nikkei Asian Review dropped 7.9% from a year ago to 703.91 billion New Taiwan dollars ($24.02 billion) in February, marking the lowest in two years. Sales at these companies are a gauge of global electronic demand.

Fourteen tech companies on the list generated less revenue from a year ago while 10 of them reported double-digit decreases. Overall revenue dropped 26.1% from January, already a traditional slow month for the electronics supply chain.

To compare like-for-like since Lunar New Year fell between January and February in 2017, the Nikkei Asian Review analyzed numbers for the two months as a whole. The revenue for the companies in January-February 2018 rose 3.2 % from a year ago. But 10 of the 19 companies saw revenue slump year-on-year for the first two months.

Combined sales for nine Apple suppliers fell 4.8% to NT$573.6 billion, which also marked a two-year-low. But for the January-February period, they grew 6.2% year-over-year as the average sale price of iPhones rose from a year ago.

Previously, the Nikkei Asian Review reported that Apple has halved the orders for its premium handset iPhone X to some 20 million units for the January-March period. Analysts suggest the demand for iPhone X could be even weaker.

"For iPhone X, after supply chain checks, the shipment could be down to some 16 million for the current quarter and continue to fall to some 7 million units for the next quarter," said Jeff Pu, an analyst at Yuanta Investment Consulting. "But from the revenue perspective, the decline could be mild as the supply chain could benefit from a higher average sale price per unit for the iPhone X and iPhone 8 ranges, as well as the relatively healthy demand for older and cheaper iPhone models."

Pu said the outlook for smartphones is weakening in the current quarter also due to high inventories from Chinese manufacturers such as Oppo and Vivo, while robust demand for commercial notebooks from HP and Dell is helping the supply chain.

In February, major iPhone assembler Hon Hai Precision Industry, better known as Foxconn, saw a 4.1% fall in its revenue at NT$277.81 billion from a year ago, the lowest monthly revenue since August 2014. But Foxconn still managed to report a 6.9% sale growth on the year for the first two months of 2018 as it still benefited from the higher average sale price of iPhone X.

Foxconn's smaller rival Pegatron's revenue of NT$76.83 billion rose 2.1% year-on-year in February and expanded 20.3% for the first two months of this year.

Foxconn is the sole supplier of the costly iPhone X, and a key maker for the iPhone 8 Plus model while Pegatron mainly makes iPhone 8 and iPhone 7 models.

Meanwhile, Taiwan Semiconductor Manufacturing Co., the sole supplier of iPhone core processor chips, saw its sales go down 9.5% from a year ago to NT$64.64 billion.

C.C. Wei, co-chief executive of TSMC, said mid-January that his company sees smartphone-related revenue to be flat for all of 2018. Wei said unit shipments for high-end smartphones will decrease this year while mid-to-low end phones will still increase slightly. TSMC also supplies to Huawei Technologies' chip arm Hisilicon Technologies, and two key Android smartphone chip providers of MediaTek and Qualcomm.

Advanced Semiconductor Engineering, a chip packaging and testing company for iPhones and Android phones, saw its revenue tumble 9.9% from a year ago in February.

Both TSMC and ASE's revenue dropped more than 2% year-over-year for the January-February period amid overall smartphone slowdown and unfavorable foreign exchange rate.

Sales for iPhone camera lens maker Largan Precision plunged 35.3% from a year ago last month. The company dominated orders for high-end lenses for iPhone's dual cameras while it also supplies to well-known Chinese smartphone brands such as Huawei, Oppo and Vivo. For the January-February period, the lens provider said its revenue declined 20.1% from a year ago due to sluggish demand from China's mobile clients and Apple's scaled back orders.

Catcher Technology, an iPhone metal frame and Macbook metal housing supplier, reported a sales rise of 20.1% from a year ago in February. It even showed a robust 44.6% growth year-over-year for the January-February period.

The casing maker mainly makes metal frames and assembles those with glass backs for the iPhone 8 and iPhone 8 Plus models, and metal casings for iPhone 7. It did secure more orders from its U.S. competitor Jabil and Foxconn's casing unit. The company also makes metal chassis for notebook-makers such as HP and Dell.

The best performer for February on the watch list was Nanya Technology, the world's No. 4 dynamic random access memory maker after Samsung Electronics, SK Hynix and Micron Technology. Its revenue surged 49.3% from a year ago in February and also up 50.2% for the first two months of this year, benefiting from the rising prices of memory chips and relatively tight supply in the market.

The worst performer for February was smartphone maker HTC. Its revenue slumped 44.0% from a year ago in February due to fierce competition in a slowing mobile market and having sold a part of its smartphone design team to Google last year.

Nikkei staff writer Chien Chia-Hung contributed to this report. 

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