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Taiwan tech logs record sales on iPhone-Xbox perfect storm

Electric vehicles and US sanctions on SMIC also keeping suppliers busy

The debut of 5G-compatible iPhones helped push Taiwan's tech sector to record sales in November.    © Reuters

TAIPEI -- Revenue in Taiwan's technology sector surged to record levels in November as the popularity of 5G-compatible iPhones and rising demand for personal computers spurred by the pandemic kept plants humming at chip and panel manufacturers.

Nineteen large Taiwanese information technology companies rang up a total of 1.45 trillion New Taiwan dollars ($51.6 billion) for November, data compiled by Nikkei shows -- the highest on record for any month since the survey began in January 2013.

"The industry in Taiwan is experiencing an unprecedented boom," said Liu Wen, semiconductor analyst at the government-affiliated Market Intelligence & Consulting Institute. Besides chips, orders from overseas for personal computers and servers are flooding Taiwanese companies, he said.

Taiwanese manufacturers such as Foxconn and Taiwan Semiconductor Manufacturing Co. supply companies like Apple, Google and Amazon. The strong orders Taiwan is now enjoying are likely to translate into rosy earnings at the global tech industry a couple of months down the road.

Thirteen of the 19 companies logged double-digit jumps, including chipmaker MediaTek, which boosted revenue 62.7% to NT$33.5 billion. Foxconn, the iPhone assembler formally known as Hon Hai Precision Industry, reported a 13.1% gain to NT$681.3 billion, while rival contract electronics maker Pegatron posted a 26.1% jump to NT$179.1 billion.

Taiwanese players are assembling the entire supplies of the new iPhone 12 and 90% of the iPad, while producing close to 90% of all servers in the world and over 80% of PCs. They are also responsible for 70% of all chip contract manufacturing in the world market.

This is why the monthly revenue data is considered a leading indicator of global tech and electronics demand, which an industry source says usually "lags a month or two behind." That is how long it takes for Taiwanese-made products and parts to be shipped to markets around the globe and sold in their stores.

Foxconn and other Taiwanese players also ship servers to the big four, such as Google and Amazon, to be assembled and installed.

LCD panel maker Innolux says it plans to keep production facilities open during the Lunar New Year holidays in February.

Six factors are driving the unprecedented demand: 5G, new iPhones, U.S. sanctions on Chinese tech companies, the coronavirus pandemic, popular game consoles and electric vehicles.

This fall's debut of the iPhone 12, Apple's first 5G-ready handset, kept contract manufacturers for the American company busy, but this was within what was anticipated. What took companies aback was that the additional surges in COVID-19 cases around the world in the autumn fueled demand for work-from-home devices, Liu said. PC and tablet shipments increased significantly, and this year's shipments are now seen up 15% on the year.

This coincided with the releases of the new Xbox and PlayStation game consoles, the first major launches from Microsoft and Sony in seven years. These popular systems are mostly built by Taiwanese companies.

What's more, the U.S. blacklisting of Chinese chipmaker SMIC this month has spurred chip designers Qualcomm and Nvidia to take their business away to Taiwanese foundries.

The accelerated global shift from gasoline cars to electric vehicles, which use significantly more chips, also adds to the burden on Taiwanese tech companies. Until now, the supply priority was given to electronics makers, with the auto industry put on the back burner. Now automotive demand for chips has grown, heating up competition among buyers and leading to a slight shortage, according to an industry insider.

Taiwan's tech industry's unprecedented boom "will last until next spring at the least or the middle of next year," Liu predicted.

Some, like TSMC, are making investments to raise capacity. Still, given the industry's ups and downs, companies normally shy away from making quick investment decisions. This means that supplies are expected to remain tight for the time being.

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