Hon Hai Q2 Net Income Declines

Bloomberg reports that Hon Hai has posted its first quarterly earnings drop in seven years. According to Bloomberg Q2 net income dropped 24% from NT$15.6 billion in Q2 2007 to NT$11.9 billion Q2 2008.The net income declined despite an 18% increase in sales to NT313.6 billion. However, Bloomberg notes this is the slowest growth for Hon Hai in three years. Bloomberg notes the causes of the slowing growth and income decline to be:

• Slowing shipments

• Decreased profit at Foxconn

• New labor laws and minimum wage in China

Bloomberg notes:

Sales rose about 18 percent to NT$313.6 billion, the slowest growth in more than three years, as shipments to some clients eased and profit at Hon Hai's Foxconn International Holdings Ltd. unit slumped. New rules introduced this year increased labor expenses, curbing profit.

Bloomberg continued saying:

Hon Hai faces higher costs this year as staff expenses at its Chinese factories rise following the Jan. 1 introduction of new labor laws, which mandate minimum wages and severance pay. New accounting rules in Taiwan that require expensing of employee share bonuses also added to costs.

Bloomberg also notes that Foxconn International was also exposed to increasing costs. Bloomberg wrote:

Higher tax expenses, spending on research, and increased production costs led Hong Kong-listed Foxconn International, which is 72 percent owned by Hon Hai, to post a 56 percent decline in first-half profit to $142.2 million.

The increased costs are unavoidable for Hon Hai and Foxconn. Hon Hai's massive factory in Shenzhen employs a couple of hundred thousand people and a required increase in wages would certainly increase the labor costs significantly. Hon Hai have been actively investing in manufacturing facilities elsewhere e.g. Vietnam but even there they are being exposed to labor unrest and a very high inflation rate.

Bloomberg: Hon Hai Reports First Profit Decline in Seven Years

Wistron Chairman says Netbooks not a Threat

Earlier this year we noted concerns about netbooks cannabilizing the traditional notebook market in Will Netbooks Cannibalize Notebooks? and Impact of Low Cost PCs . Yesterday Simon Lin, the Chairman of Wistron, said netbooks are not a threat to the traditional markets. Digitimes reports:

Wistron chairman Simon Lin has reiterated his conservative outlook for netbook growth, saying that the position of traditional notebooks will not be affected by the rising role of netbooks over the next two years.

Acer and Asustek Computer might have over estimated the potential of the netbook market as margins from netbook production are still lower than traditional notebooks, said Lin. Netbooks are still uncompetitive in terms of their smaller keyboards and panels, and are therefore still a niche device, he added.

First, I personally think in the short term netbooks may have a chance of stealing short term market share. The current state of the economy and people's traditional concerns about money at times like this will make them more inclined to buy the cheaper substitute, and netbooks are substitutes. Given a decent economy and reduced economic concerns, I would say people would be more willing to buy the more expensive models.

Additionally, I think I said it before somewhere on this blog, I would think demand for more expensive notebooks is probably more price inelastic than say the cheaper models. I would think demand for US2,000 or above notebooks would not be threatened by a smaller US500 model. However, I do think the cheaper notebooks positioned at entry level users (US1,000) may face a bigger challenge.

Digitimes: Netbooks will not affect traditional notebook sales in the near term, says Wistron chairman

AUO to Build Four New Plants

AU Optronics (AUO) has been speaking for a while now about about developing new 10G fabs in central Taiwan (see No 10G AUO Plant in China and AU Optronics Gets Land). Yesterday Digitimes reported AUO have committed to building four new 10G or above fabs in Taiwan. Digitimes notes:

AU Optronics (AUO) plans to invest NT$400 billion (US$12.68 billion) to build four 10G or above LCD panel plants in Taiwan in the next 10 years, company chairman KY Lee has disclosed.

Lee's revelation, which followed a meeting with Taiwan's Premier Liu Chao-shiuan Wednesday, comes as a confirmation of previous local press reports that the LCD panel giant would be constructing four next-generation plants at a new campus of the Central Taiwan Science Park (CTSP).

After the announcement AUO shares surged. Reuters wrote:

Shares of Taiwan's AU Optronics Corp, the world's third-largest LCD maker, jumped more than 2 percent to near a two-week high on Thursday, after it announced a long-term investment plan to build new factories. AU's shares rose 2.2 percent by midday, defying the broader electronics sector's 0.6 percent fall and the main TAIEX's 0.4 percent drop. Shares of smaller local rival Chi Mei Optoelectronics Corp also rose 1.3 percent.

We at Hi Tech Taipei are always pleased to see Taiwanese companies investing in Taiwan. Taiwan's economy certainly needs the boost and the jobs generated by the investments are also welcome. Of course the investments will also help AUO stay competitive in the long run. Although the investment is going to be large, the downstream benefits of enhanced capacity, better products and cost advantages arising from the more advanced factory will benefit them greatly. It will also help to keep Taiwan competitive in technology and at forefront of the hi tech sprint.

Digitimes: AUO promises four 10G or above LCD plants in Taiwan
Reuters: AU shares hit near 2-wk high after new LCD investments

Semiconductors Increasingly Gloomy Outlook

A couple of days ago in Record Sales for IC Design Houses we observed some of the design companies were optimistic about sales in August and some of the design houses were expecting record sales for the month. However yesterday in Analyst Cuts TSMC Forecast we noted a decline in TSMC forecast implied a decline in the greater market.

To follow-up, Digitimes yesterday reported some IC design houses focused on PCs have become more conservative in their predictions for Q3. Digitimes writes:

PC related IC design houses Realtek Semiconductor, Anpec Electronics and Integrated Technology Express (ITE) have all reduced their sales growth targets for the third quarter because demand from motherboards in August has not been as strong as expected. Market watchers expect Richtek Technology will also reduce its third-quarter sales target.

The IC design companies indicated that shipments to Asustek Computer, Gigabyte Technology and Micro-Star International (MSI) declined week by week in August. The Taiwan-based motherboard makers are also pessimistic about the outlook for September, prompting the IC design companies to adjust their sales growth targets for the third quarter.

In IC Design Houses' Growth Constrained we also observed negative trends in the TFT LCD ID driver market. These drivers are typically used in consumer electronics devices and a slowing economy has continued to have a negative impact on the demand for these devices. However, Digitimes observes that some TFT LCD manufacturers are investing in the upstream driver companies to ensure they have sufficient supplies. Digitimes writes:

As the number of LCD driver IC providers continues to decline due to low profitability, TFT-LCD makers are finding it increasingly important to forge close ties with the remaining industry players in order to maintain stable upstream supplies of LCD driver ICs.

Except for Novatek Microelectronics which entered the market the earliest, most of the remaining LCD driver IC design companies including Himax Technologies, Orise Technology, Sitronix Technology and Raydium Semiconductor have panel makers among their major shareholders.

Surprisingly, at the time of writing, most of the companies listed above had seen slight increases in the share prices. Only ITE saw a significant drop.

• ITE (3014.TW) shares had dropped 3.25%
• RealTek (2379.TW) shares were up 0.62%
• Anpec (6138.TWO) shares were up by 0.10%.
• Novatek (3034.TW) shares were up by 2.97%
• Orise shares (3545.TW) remained unchanged
• Sitronix (8016.TW) shares were up 1.84%
• Raydium (3592.TWO) shares were up by 0.41%

Interestingly, I also saw RealTek (2379.TW) has been given a target price of NTD99 by both Citigroup (in July) and KGI Analyst Noreen Niu earlier in June. Right nowRealTek (2379.TW) is trading at NTD65.50. A share price of NTD99 means the price has to rise 50%. Now should I buy?

Digitimes: PC related IC design houses turn conservative over 3Q outlook on falling demand from motherboards
Digitimes: LCD panel makers invest in LCD drive IC suppliers to stabilize market position

Foxconn's iPhone Girl

Something amusing this morning!

A 'beautiful mistake' on the Foxconn factory floor continues to generate interest around the world. A young woman working on iPhone factory line in Foxconn's Shenzhen factory had her picture take to test the phone. Apparently the phone was fine but the test personell forgot to delete the picture. Of course the picture was discovered in the UK when the new owner turned on his phone and posted about it online. This incident has spawned many stories. We quote the Sydney Morning Herald:

China's "human flesh search engine" is in hot pursuit of an unnamed Chinese factory worker after photographs of her showed up unexpectedly on a new iPhone 3G purchased recently in Britain.

In one of the photos, a young woman dressed in a pink striped factory uniform and wearing a matching white cap and rubber gloves, is seen smiling and flashing a "V" sign as she leans over an iPhone assembly line.

The photos were discovered by an iPhone user in Britain who promptly posted his find on the MacRumors forum, setting off a global chain reaction of media interest and culminating in the quest by Chinese internet users to discover her identity.

The term "human flesh search engine" refers to this type of mob reaction by China's so-called netizens (internet citizens) to pool their collective resources in order to track someone down.

The good news is neither the woman nor her boss were fired. She has recently been dubbed the "iPhone Girl" and her true identity is being pursued by what seems to be a fair plethora of Chinese netizens. She has asked her identity be kept secret.

Sydney Morning Herald: Net mob search for iPhone girl's identity

Foxconn Profits Drop

Cellular News reports Foxconn saw a huge 56% drop in profits during the first half of this year. Cellular News wrote:

Contract handset maker Foxconn International Holdings said Wednesday its first-half net profit fell 56% from a year earlier, on higher operating costs, changes in its product mix, and increased investment spending.

The company, which makes mobile phones for companies such as Motorola and Nokia, posted a net profit of US$142.2 million for the six months ended June 30, down from US$324.0 million a year earlier.

The result was lower than the average US$256 million forecast of five analysts polled by Dow Jones Newswires.

The blue-chip company said its first-half revenue rose 4.4% to US$4.79 billion from US$4.59 billion a year ago.

Foxconn said in June it expects its gross profit margin to fall this year because of a price war, as well as higher costs and corporate taxes in China.

Rising costs in China, as we have repeatedly reported, is making China a less attractive investment environment. We highlighted the need for companies to search for other countries to invest in in China + 1 Strategy: The Pitfalls and the Promise . As we noted then many countries were looking to Vietnam but with recent labor unrest and an inflation rate of 27% even Vietnam is becoming less attractive. As for the price war, well it is to be expected. Foxconn however are a big and tough company and should pull through it OK but if market demand doesn't pick up and big clients such as Motorlola don't get their act together, Foxconn might face a more challenging ride over the short term.

At least they will always have iPhone Girl.

Cellular-News: Foxconn International 1st Half Net Profit Falls 56% to US$142.2 Million

Wistron has a Good H1

One of Taiwan's leading ODM companies, Wistron, has posted a 50% increase in gross profit for the first half of the year. The Taipei Times reports:

Wistron Corp (緯創), one of Taiwan’s leading computer and peripheral original design manufacturers (ODM), reported yesterday a first-half gross profit increase of 50 percent to NT$11.01 billion (US$350 million).

The company attributed the increase to strong shipments of notebooks and liquid-crystal displays (LCD). However, Wistron also warned of slower shipment growth of about 20 percent in the third quarter, falling to below 10 percent by the fourth quarter.

The firm’s current customer base includes large computer firms such as Dell Inc, Hewlett-Packard Co, Microsoft Corp and Sony Corp. Wistron’s product line consists of notebook computers, desktop PCs, servers, personal digital assistants and LCD TVs.

Wistron, once part of the design, manufacturing and services unit of Acer Inc (宏碁), was spun off in 2001. Earlier in the year, Wistron agreed to purchase the computer monitor business of Lite-On Technology Corp (光寶) for NT$9.2 billion.

“The business situation is in line with [our] original planning. The merger with Lite-On Technology will shift operating margins down slightly. Our second half margin projection is around 5.5 percent,” said Simon Lin (林憲銘), Wistron chairman and chief executive officer, during an investors’ conference yesterday.

As noted above, the company is expecting a slowdown in the Q3 and Q4. This slowdown is inline with earlier predictions by iSuppli and others. We noted this slowdown in contract manufacturing in Contract Manufacturing to Slowdown and Contract Manufacturing Growth Slows. Some are anticipating the slowdown in the industry will bring about some sort of consolidation.

Taipei Times: Strong shipments boost Wistron first half profits

ASUSTek Added to Dow Jones Technology Titans Index

The Street Insider reports ASUSTek will replace Electronic Data Systems Corp on the Dow Jones Technology Titans 30 Index. ASUSTek joins three other Taiwanese companies in the index. The three others are Taiwan Semiconductor Manufacturing Corporation (TSMC), High Tech Computer Corporation (HTC) and Hon Hai Precision (Hon Hai). There are now four Taiwanese companies listed on the index. Only the New York Stock Exchange and the NASDAQ have more companies represented. A full list of companies on the index is below:

• Alcatel-Lucent (Paris)

• Apple (NASDAQ)

• Applied Materials (NASDAQ)

• ASUSTek (Taiwan)

• Canon (Tokyo)

• Cisco Systems (NASDAQ)

• Corning (New York)

• Dell (NASDAQ)

• EMC (New York)

• Fujitsu (Tokyo)

• Google (NASDAQ)

• Hewlett-Packard (New York)

• HTC (Taiwan)

• Hon Hai (Taiwan)

• Intel (NASDAQ)

• IBM (New York)

• LM Ericcson (Stockholm)

• Microsoft (NASDAQ)

• Motorola (New York)

• Nokia (Helsinki)

• Oracle (NASDAQ)

• Qualcomm (NASDAQ)

• RIM (Toronto)

• Ricoh (Tokyo)

• Samsung (Korea)

• SAP (XETRA)

• TSMC (Taiwan)

• Texas Instruments (New York)

• Xerox Corp. (New York)

• Yahoo! Inc. (NASDAQ)

The presence of four Taiwanese companies on this index is another indicator of their dominance of the global tech sector beyond the United States. Japan only has three companies represented and Korea one.

Street Insider: Component Change Made to Dow Jones Technology Titans 30 Index

UMC Facing More Trouble

The media are reporting that the Hsinchu and Taipei offices of United Microelectronics Corporoation (UMC), the worlds second largest contract chipmaker, have been searched by prosecutors in relation to allegations about insider trading that took place in 2006. The Taipei Times reports:

Taiwanese prosecutors yesterday raided offices at United Microelectronics Corp (UMC, 聯電), the world’s second-largest custom-chip maker, as part of a probe into insider trading.

Prosecutors are investigating transactions that took place around April to July 2006, Lo Hsueh-mei (羅雪梅), a spokeswoman for the Hsinchu District Prosecutors’ Office, said by telephone yesterday.

A public relations official at UMC confirmed to the Taipei Times that the company’s Hsinchu headquarters and its Taipei office were searched yesterday afternoon over some of the company’s re-investments.

But the official, who requested anonymity, did not clarify which re-investments prosecutors were investigating nor confirm that the raid was connected to the insider trading probe.

The business news Web site cnYes.com said last night that the probe could be related to UMC’s purchases of shares of ProMOS Technologies Inc (茂德科技), the nation’s third-largest maker of computer memory chips, in 2006. It did not cite sources.

News of the raid came on the same day the company announced it would spend as much as NT$4.21 billion (US$134 million) to buy back 1.51 percent of its shares on the open market to prop up distressed share prices.

This is just another scandal in the long history of UMC. A few years ago the then Chairman Robert Tsao was accused of (and later acquitted) of not disclosing information about investments in China a few years ago. Robert Tsao was one of the early and youngest stars of the Taiwan tech sector and the allegations led to his early resignation and the rise of Jackson Hu to Chairman (Jackson Hu recently resigned from the position. See Jackson Hu Takes a Step Back at UMC ). The International Herald Tribune wrote at the time:

United Microelectronics Corp., the second-biggest supplier of made-to-order semiconductors, has challenged Taiwan prosecutors to indict its chairman, Robert Tsao, to clear up allegations of wrongdoing relating to He Jian Technology, a company based in Suzhou, China.

"In order to eliminate disputes arising from the He Jian case, we would like to ask the Hsinchu District Prosecutor's Office to indict Chairman Robert Tsao as soon as possible" for any wrongdoing, UMC said in an open letter published Wednesday on the front page of the China Times newspaper.

A United Microelectronics spokesman, Alex Hinnawi, confirmed that the letter had come from the Hsinchu-based company. He declined to elaborate. Tsao was unavailable to comment, according to his secretary, as was a spokesman for the Hsinchu District Prosecutor's Office, Tsai Tien-yuan.

Tsao was questioned by investigators on June 9 after being fined 3 million Taiwan dollars, or $95,600, by Taiwan's Financial Supervisory Commission in April for breaching securities laws with late disclosure of information relating to He Jian.

UMC said in March that it would receive a 15 percent stake in He Jian, worth more than $110 million, in compensation for "past assistance" and for anticipated cooperation. The companyearlier had denied that it had an investment in He Jian.

Earlier this month the Chairman of Powerchip, Frank Huang, was also indicted for insider trading. The China Post wrote:

Powerchip Semiconductor Corp., Taiwan's biggest maker of computer-memory chips, fell the most yesterday in more than five years after prosecutors indicted Chairman Frank Huang for insider trading and breach of trust. Powerchip tumbled 7 percent, the daily limit, to close at NT$6.68 on the Taiwan Stock Exchange, the biggest decline since June 23, 2003. The benchmark TAIEX index lost 0.3 percent.

Huang, 58, profited from a share sale in Macronix International Co. based on insider knowledge, and breached shareholders' trust by using company funds for renovations and furniture for his residence in 2003 and 2004, the Hsinchu District Prosecutors Office said on its Web site Thursday.

Taiwan prosecutors are seeking a jail term of four years and six months and a NT$60 million fine for Huang. Powerchip denied the allegation.

Who knows what these people were thinking or why they were targeted. They are two fairly big companies and have been around for a long time. They should know better. It will be interesting to see how these two cases pan out.

Taipei Times: UMC headquarters, Taipei office raided over ‘insider trading’
International Herald Tribune: UMC lays down challenge over He Jian
China Post: Powerchip shares fall after chairman Huang indicted

EMS Giant Hon Hai

Hon Hai Precision Technologies (2330.TW) (Hon Hai) is one of Taiwans signature companies. Most Taiwanese people know about Hon Hai and its founder, Terry Guo. The Hon Hai factory in Shenzhen is, being probably the biggest factory in the world, legendary. Hon Hai is the largest EMS (electronic manufacturing services) company in the world but, outside of analyst circles or the tech sector, not widely known.

Tech-ON recently ran a three-part translation of an article about Hon Hai from the July 31, 2006 issue of "Nikkei Electronics." The article starts:

In the town were a number of brand-new factories with exterior walls painted off-white, residential buildings for the factory workers and commercial facilities. There were more than 70 huge buildings as far as I could see. Loaded trucks were continuously coming and going on the three-lane roads among the buildings.

The number of employees working at the site reportedly surpasses 100,000. Given the size of the expansive site, some travel from a building to another in electric golf carts. This is the Shenzhen plant of Hon Hai Precision Industry Co Ltd (commonly known as Foxconn) of Taiwan.

Anyone would be surprised by what end-products they are producing at this plant, which never stops operating, day and night. The products manufactured there include the "iPod nano," the "Nintendo DS," the "PSP" and Motorola Inc's "RAZR" slim mobile phone. Mobile phones from Finland's Nokia Corp and Dell Inc's PCs are also manufactured here. It sounds like a global list of hit products.

The three part article is a good one and well worth the read. You can read the article by following the links below:

EMS Giant Hon Hai [Part 1]

EMS Giant Hon Hai [Part 2]

EMS Giant Hon Hai [Part 3]

Analyst Cuts TSMC Forecast

EETimes reports an analyst has reduced his quarter-on-quarter growth expectations for wafer shipments from 7% to 5%. Apparently large customers have cut their orders. EETimes writes:

A bad sign for the industry? An investment banking firm has cut both its third- and fourth-quarter estimates for Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC).

Mehdi Hosseini, an analyst with Friedman Billings Ramsey & Co. Inc. (FBR), cut his forecast due to lower-than-expected demand from TSMC's foundry customers. It also means that the overall chip industry could be slowing in the second half of 2008.

''Recent checks suggest to us that overall wafer shipments in 3Q could be up only 5 percent quarter-over-quarter, below previous expectations of up 7 percent to 8 percent quarter-over-quarter,'' he said in a report. ''This is attributed to cuts in shipment by key/large customers from the communication (Marvell, Qualcomm, TI), graphics, and consumer sectors.''

There is more bad news. ''Additionally, we believe that forecasts for 4Q wafer shipments have recently been cut, with customers from the consumer end markets (particularly game console, digital imaging, set-top box, DVD, FPD) and communications (Bluetooth) having the largest cutbacks,'' he said.

''Thus, we now expect 4Q wafer shipment to decline by as much as 8 percent to 10 percent quarter over quarter, below previous expectations of down 4 percent to 5 percent quarter over quarter,'' he said. ''Our current read on 1Q '09 wafer shipments suggests below seasonal shipment decline of 5 percent to 10 percent quarter over quarter, though we note that it is too early to make an accurate assessment of the 1Q '09 demand environment.''

FBR is cutting its calendar 2008 and 2009 revenue estimates from $11.726 billion and $12.447 billion, respectively, to $11.545 billion and $11.661 billion, respectively. Its EPS estimates have changed from $0.75 and $0.78 to $0.74 and $0.73.

This is indeed a bad sign for the industry and indicative of the current issues facing the semiconductor industry globally and the semiconductor value chain here in Taiwan. Despite this bad news, some companies have been optimistic,especially design houses (see Record Sales for IC Design Houses). Yesterday we wrote TSMC was diversifying into the MEMS industry. One of the reasons for this diversification is that this sector has a faster than average growth rate than other semiconductor sectors.

Despite this seemingly bad news (negative perception) TSMC shares traded higher (for most of the day) on the Taiwan stock exchange. At the time of writing the shares were 0.17% higher.

EETimes: Analysts cuts forecast for TSMC

MEMS Market Attracting more Players

In Taiwan Manufacturers Move into MEMS market we noted that TSMC, UMC and ASE were all moving into the micro-electro-mechnical system (MEMS) market sector. In TSMC Increases Their CAPEX we noted TSMC were upgrading their 0.35 micron processes to be able to accomodate MEMS systems.

Reuters noted yesterday that the growth of the MEMS market due to the rapid adoption of motion sensor chips in the Wii gaming devices and the Apple iPhone has provided an increased incentive for the world's chipmakers to jump into the market. Reuters notes TSMC had sat on the sidelines of this sector for sometime but has now jumped into the market, confirming the earlier reports. Reuters observes:

Chip makers are convinced of the potential for motion sensing chips in portable gadgets, thanks to the success of Nintendo's Wii game consoles and Apple's iPhones.

The market for micro-electro-mechanical systems (MEMS) devices, which detect motion using acceleration sensors, could reach $7.3 billion this year and $11 billion by 2011, Taiwan chip maker TSMC has said, quoting independent research.

However, although there is growth opportunities in this sector, the sector is still small. Reuters writes:

In dollar terms, the MEMS market is still relatively small for firms that generate billions of dollars in revenue each year. But potential growth is triple that of the meager 4 percent rise that TSMC projected for the entire $280 billion semiconductor market this year.

But with chip manufacturers facing a downturn in demand for memory and logic chips, the growing use of motion sensing devices in mass market gadgets, such as phones and music players, offers a chance to boost sales.

At its annual technology symposium in May, Taiwan Semiconductor Manufacturing Co Ltd (TSMC), the world's top contract chip maker, featured MEMS as among the most promising new technologies.

"TSMC sat on the sidelines for several years but now appears convinced that MEMS is ready for prime time with consumer electronics and mobile applications," iSuppli analyst Richard Dixon said.

"Following iPhone's lead, which put motion sensing to the core of the stunning display, we expect to see (MEMS) mobile phones rapidly expand as manufacturers scramble to differentiate with similar functions."

NEW DEVICES

TSMC, which has started making MEMS chips for Analog Devices , could see the business make up 10 percent of its total sales this year, with the ratio growing to 20 percent in the next 2-3 years, Taiwan's Topology Research said.

Rival United Microelectronics Corp (UMC) is also reportedly preparing to supply similar chips later this year or next, although the company declined to comment.

MEMS suppliers that traditionally made most of their revenue in the automotive sector have reached the limits of capacity, and many have chosen either to upgrade their manufacturing technology, like STMicro or Freescale, or to subcontract out production, iSuppli's Dixon said.

In an interview with Tech-ON, the head of TSMC's MEMS business Robert Chin-fu Tsai discussed TSMC's movement into the sector. Mr. Tsai said:

MEMS output is about 4,000 chips per month at both Fab2 and Fab3. Considering that the output capacity of both lines is slightly more than 100,000 chips per month, MEMS production accounts for a tiny portion at the moment. This amount will expand rapidly, however, in the second half of this year.

The number of MEMS devices to be mass-produced will increase all at once from late 2008 to early 2009. Among the multiple MEMS projects we are currently conducting, three will enter the volume production phase within 2008 and one in early 2009. In accordance with this schedule, the ratio of MEMS production is likely to increase at Fab2 and Fab3 first.

This is another new sector for Taiwanese companies and once again they are leveraging their pure-play foundry strengths to establish a dominant position.

Reuters: Chip makers get moving with motion sensing chips
Tech ON: TSMC Discusses MEMS Foundry Biz

Taiwan Moving into Robotics

EE Times reports Taiwan is aiming to grab a significant slice of the international robotics market. Recent trends have shown increased investment in robotics in Taiwan and some of the bigger players including VIA, MSI and Hon-Hai have moved into the sector. EETimes writes:

At the Taipei International Robot Show (TIROS), which was held in Taiwan from August 21-24, Via Technologies Inc. showed several ''entertainment robots'' based on its boards and chips.

Hon Hai, MSI and other Taiwan concerns are jumped in the arena, which is generating interest on the island. Taiwan's private sector increased its investment of robotics to $192 million in the first half of 2008, up 17 percent from the like period a year ago, according to the Robotics Association Taiwan (ROBOAT).

Taiwan's robot manufacturers are aiming for a share of the global market, which is worth a total of $17 billion annually, according to the International Federation of Robotics (IFR).

Industrial robots are expected to increase from about 951,000 units by the end of 2006 to 1,173,300 by the end of 2010, representing an average annual growth rate of 5.5 percent, the IFR said.

Robots for entertainment and leisure are poised for even faster growth with projected installations between 2007 and 2010, more than doubling the installed base in 2006 of about 1 million units, according to the IFR. These robots can perform a variety of functions for their human owners including security, maintenance and entertainment. The market data was provided by the Taiwan External Trade Development Council.

This is another example of how Taiwan's tech sector are always on the look out for the next best thing. They are always searching for new opportunities where they can leverage their core strengths in computing product design and development. They did this with the silicon industry, computers and they are now doing this in the solar industry and other sectors. It would not surprise me if in a few years they were the dominant players in this sector.

EETimes: Taiwan glides into robot market

Taiwan's GDP Growth Slows

Bloomberg reports some dismal news for the Taiwanese economy:

Taiwan's economy probably grew at the slowest pace in more than a year last quarter as consumer spending cooled and U.S. customers bought fewer laptops, flat- screen televisions and mobile phones.

Gross domestic product expanded 4.54 percent from a year earlier, easing from a 6.06 percent gain in the first quarter, according to the median of 14 economists surveyed by Bloomberg News. The report is due about 4:30 p.m. in Taipei today.

The weakest economic growth since the start of 2007 may have driven up the jobless rate to a three-month high in July as companies pared hiring. Easing U.S. demand has slowed sales for Acer Inc. and Taiwan Semiconductor Manufacturing Co., while Marks & Spencer Group Plc said it will close three Taiwan stores as rising living costs damp spending by the island's consumers.

``The economy is facing growing headwinds and will slow sharply over the rest of this year,'' Rob Subbaraman, chief Asia economist at Lehman Brothers Holdings Inc. in Hong Kong, wrote in a report. ``There are growing signs of weakness in the tech sector, the linchpin of the economy. Consumption is weakening.''

The Taiex Index of stocks has declined 17 percent this year on concern slowing global growth will erode corporate earnings. Exports are equivalent to about 50 percent of the island's GDP.

Taiwan follows South Korea, Singapore and Japan in reporting a deteriorating economy because of faltering demand in the U.S., the region's largest overseas market.

Japan's economy, Asia's largest, shrank in the second quarter by the most since 2001. Singapore posted the weakest growth in five years and South Korea's economy expanded at the slowest rate in more than a year.

Rising Unemployment

Taiwan's unemployment rate rose to 3.9 percent in July after some companies halted operations, according to the median estimate of 12 economists surveyed by Bloomberg. The statistics bureau releases the jobless report at 4 p.m. today.

The island's intercity bus operator Dragon Bus Corp. suspended its services for a year because of high oil prices. Marks & Spencer last month said it will shut three Taiwan stores it runs with President Chain Store Corp., less than 18 months after the U.K.'s largest clothing retailer entered the market.

``Downside risks have intensified. The economy will likely continue decelerating in the second half,'' said Cheng Cheng- mount, chief economist at Citibank in Taipei. ``We expect policy makers to shift focus from upside inflation risk to downside growth risk in the second half.''

The central bank raised its interest rate to a seven-year high of 3.625 percent on June 26 to damp inflation. That marked the 16th consecutive quarterly increase in borrowing costs.

Inflation accelerated to 4.97 percent in June, the fastest pace in eight months, as fuel and food costs climbed.

Slowed growth, increasing unemployment and rising inflation is not good news for the weekend. I am encouraged to see Bloomberg not taking a petty approach to laying the blame of slowing growth at the door of the government. The quoted article aboved correctly observes that decreasing demand in the US is having an adverse affect on Taiwan's economy in particular and the regional economies generally. Unfortunately there is not much the government can do and unfortunately for President Ma his election platform was rejuvenation of the economy. I am not sure how he intends to do that but we will wait and see. His best bet I reckon would be to ensure the economy stays viable and companies here remain competitive making sure when the global economy improves the local companies are ready to pounce.

Bloomberg: Taiwan's GDP Growth Probably Slowed on Spending, U.S. Exports

Taiwan Companies Return to List in Taiwan

The Wall Street Journal has an interesting article on Taiwanese companies returning home to list on the Taiwan Stock Exchange. The WSJ writes:

Taiwan's new government is close to winning some important victories in its effort to revitalize the island's stock market, as several Taiwanese companies that had gone public overseas are now considering listing at home.

Ju Teng International Holdings Ltd., which makes notebook-computer casings and has been listed in Hong Kong since 2005, said its board will decide before the end of the month whether to make a public offering on the Taiwan Stock Exchange or to issue depositary receipts instead.

Other companies say they are considering a Taiwan listing, including Delta Networks Inc., an original design manufacturer of network-communications equipment that also trades in Hong Kong, and Ta Yang Group Holdings Ltd., which makes input devices such as keyboards and keypads for computers, mobile phones and autos.

Taiwan has set a goal of attracting 200 companies to the local exchange. "It is encouraging to see companies looking into the option of using Taiwan's stock exchange as a platform for capital-market operations," said Tao Dong, Credit Suisse's chief regional economist for Asia, who once predicted Taiwan's stock market would be marginalized in a few years.

The effort got a boost earlier this month. Taiwan's Hon Hai Precision Industry Co., the world's largest contract electronics maker by revenue and a maker of Apple Inc.'s iPods and other electronics, said it plans to list its overseas units on the Taiwan Stock Exchange. With the public listing of its Foxconn International Holdings Ltd. unit on Hong Kong three years ago, Hon Hai was one of the first Taiwan companies to turn to Hong Kong, where about 60 Taiwan companies are traded.

Warming relations with China have proved a potent lure home. Taiwan President Ma Ying-jeou, who took office in May, has eased investment restrictions that made it tricky for Taiwan-traded companies to keep significant operations in the mainland. That could help Taiwan's efforts to become a regional financial hub as it ties the island's fate closer to the mainland's.

The WSJ continues saying:

The performance of Taiwan's exchange has trailed behind that of others. Hong Kong's benchmark Hang Seng Index nearly doubled between 2005 and 2007, while the benchmark Shanghai Composite Index rose fourfold. Over the same period, Taiwan's benchmark Weighted Price Index rose about 39%. As of March, Taiwan's exchange had 712 listed companies, compared with Shanghai's 861 and Hong Kong's 1,244, according to recent research published by the Hong Kong Securities and Futures Commission.

Taipei's new policy raises the ceiling on China investment to 60% of corporate net worth. It also allows companies in which Chinese shareholders own 20% or more to list on Taiwan's exchange and abolishes a rule banning foreign companies from investing in China with locally raised funds.

Many of the Taiwanese companies exploring a domestic listing are frustrated with their stock-market valuations elsewhere. "Compared with our Taiwanese counterparts, our P/E in Hong Kong is really low," said Huang Cheng-pin, a Ju Teng spokesman. The company's P/E ratio has been about seven, while its Taiwanese counterparts have P/E ratios of about 15 on the local stock market, he said.

First up I will say its good for Taiwanese companies to list in Taiwan and that this may stimulate the local bourse and keep it competitive in the region. Taiwan has stated before they do want to become a financial hub and having more companies listed on the exchange may go a long way to helping the local stock exchange and the financial sector.

However, I find the comparison between the Hang Seng and the Shanghai stock exchange overly simplistic. The comparison is only made between 2005 to 2007 when most observers agreed the Chinese stock market was being fuelled mostly by speculation with share prices for some companies much higher than any potential future revenue. It just seems crazy to compare the two markets.

How about recent history? the Shanghai Index (SSE) has declined from 5261 in January to 2431 on 21 August. This is a 53% drop in value. On the other hand, the Taiwan Weighted Index (^TWII) has dropped from 8184 to 6918 yesterday. A drop of only 15% on the year. Both indicies may go down further but the point being made is that much of the four-fold increase in the Shanghai Stock market was speculative no substantive. The Hang Seng index is down from 27,560 to 20,392, which is a 26% decrease. On the year we should say the Taiwan index is doing better than the other two indicies, but then this would be a little too simplistic as well.

I also suspect there are also other forces driving the index movements. The underlying shares on the index are certainly very different in each case and the exposures they have will also vary significantly. The global context of the markets and the underlying forces for the predominant businesses represented in the indexes should be properly analyzed before people make superficial comparisons based on price.

What I did like to see was that the companies were being honest about why they want to come back to Taiwan. A higher P/E ratio is better for the share price (see Wikipedia page). However, the government has also for a while now been trying to attract Taiwanese companies back to Taiwan. We already noted this in Taiwanese Investment in China: Now and the Future. What might be good for the economy is that if the companies do list in Taiwan, they might be more prepared to put more of their operations on the island and thereby stimulate the job market.

Any investments back in Taiwan will be good for the economy and more listings on the exchange may help stimulate the financial sector in Taiwan too.

Wall Street Journal: Taiwanese Companies Consider Home Listing

Record Sales for IC Design Houses

Digitimes reports that despite an economic slowdown, some of Taiwan's IC design houses are anticipating record sales in August. Digitimes writes:

Despites global economic worries, August sales for some Taiwan IC design houses are expected to hit a record, with companies including Richtek Technology, Global Mixed-mode Technology (GMT), Anpec Electronics, Orise Technology, Sitronix Technology, Ralink Technology and Global Unichip seeing strong sales, according to market sources.

With stronger demand for PCs and notebooks and with the companies increasing their respective market shares in the third quarter, Richtek and GMT both had outstanding performances in July. Both their August sales are expected to be record highs for the companies and their sales in September will keep growing, the sources noted.

The continued strength of the PC sector has been a surprise to many people. In an economic downturn luxury items such as PCs are not meant to sell as well. We have commented before this may be because of the emerging markets in India and China with a growing consumer base that can afford these products and balance the adverse affects of demand in other parts of the world.

It may also be that PCs have become a larger part of our daily lives and perhaps people are seeing them more and more as neccessities rather than a luxury. The advent of the low cost PC and the demand for these products would also have helped maintain demand and keep the design houses in the game as these devices still need chips for the motherboards.

AU Optronics Gets Land

Yesterday in the LCD Panel Market Roundup we noted AU Optronics was looking for land to to build four new LCD plants. The total investment was estimated to be at least T$400 billion ($12.7 billion). Yesterday the government granted them land in Erlin, Changhua County. Digitimes says:

The Taiwan government has selected a site in the central region of the island nation where AU Optronics (AUO) will invest NT$500 billion (US$15.91 billion) to build its next generation fabs, according to authorities with the Central Taiwan Science Park (CTSP).

During a meeting on Wednesday, a selection committee under the National Science Council decided on a piece of 400-hectare land in Erlin, Changhua County to be the site for a new CTSP campus where AUO will build its new fabs, the authorities said.

Well at least they have the new site. We will be on the lookout for news on the ground breaking ceremony.

Digitimes: Taiwan government decides site for AUO's NT$500 billion LCD fab projects

Stock Prices Drop

With the exception of two, all companies listed on the TSEC Taiwan Technology Index saw declines in their share price today. Only the share prices for Compal (2324.TW up 0.32%) and Inventec (2356.TW stayed the same) didn't go down. The decline in tech company share prices followed the Taiwan Weighted Index (^TWII) down. The TAIEX went down 1.74% to close at 6918.48.

Other markets in the region followed suit. The Hang Seng (^HSI) lossed 2.58% of its value, the Korean KOSPI (^KS11) fell 1.83%, the The NIKKEI225 (^N225) went down 0.77% and the NIKKEI300 (^N300) went down 0.68%.

In Silliness is.....The Chen Scandal and Declining Share Prices we noted how the China Post attributed the Monday decline in the TAIEX (^TWII) to the Chen Shui Bian scandal. What I did miss was that Forbes, a publication I think is pretty good, also jumped in on blaming the ex-president's money laundering scandal for the decline in Monday's stock prices (see Chen's Apology Rocks Taiwanese Financials, hat-tip The View from Taiwan). Hopefully such silly assertions won't be in the press tomorrow.

I personally suspect an increase in the oil price to US$116 per barrel may be responsible for the declines (see Oil rises in Asia on falling US gasoline supplies). But with the stock market who ever really knows?

[Link: TSEC Taiwan Technology Index stock prices here @ http://finance.yahoo.com/p?k=pf_14]

Contract Manufacturing Growth Slows

Forbes has an excellent piece on the slow down in the contract manufacturing sector and speculates this will lead to consolidation in the industry. Forbes writes:

A shake-out is brewing among the world's top manufacturers that toil anonymously to make the latest cellphones, iPods and other gadgets for big names such as Nokia and Apple.

The end game could see some of the unsung contract manufacturing industry's biggest names, such as Singapore's Flextronics and Taiwan's Hon Hai, driving a wave of consolidation that will boost their top customers while squeezing some of the smaller ones.

Contract manufacturers produce much of the world's electronics, with collective revenue of $306 billion last year, making everything from PlayStations for Sony to notebook PCs for Dell, according to research firm iSuppli.

But growth is expected to dip into single-digits this year, and companies such as Celestica, Sanmina and Elcoteq saw revenues contract last year as margins erode all around.

"The competition is becoming more intense," said Calvin Huang of the Daiwa Institute. "We will see another round of consolidation among these (contract) providers."

Forbes continues noting the slowdown in the industry is exemplified by Hon Hai. Forbes observes:

The company's revenue is forecast to grow 20 percent this year to T$2.05 trillion ($65 billion), according to Reuters Estimates, down from 75 percent growth three years ago. Margins have dropped to 9.7 percent last year from 25.2 percent in 1999.

While Hon Hai has been quiet on the M&A front, Flextronics has been more active, making a number of purchases including its landmark $3.6 billion acquisition of Solectron last year. That deal helped Flextronics, whose revenue actually shrank in 2006, notch 46 percent growth last year.

Hon Hai and Flextronics shares are both down more than 20 percent this year as their growth slows, though many mid-tier players are up on hopes they could become acquisition targets.

Perhaps this slowdown is a reflection of the economy as a whole. Declining demand for computer products and reduced average selling prices accross the broad spectrum of devices will inevitably impact these companies. Many smaller manufacturers are unable to compete on scope or scale with Hon Hai and Flextronics and will therefore have few alternatives but to get bought out if the offer arrives. Of course this consolidation will meant entry barriers will increase and reduce the attractiveness of the market as a whole. This means there is less likely to be any new competitors entering the market.

Hon Hai and Felxtronics will still be around in a few years but, if the above is true, the contract manufacturing landscape is about to change. Anyway, enjoy the article.

Forbes: ANALYSIS-Shake-out looms for world's unsung gadget makers

LCD Panel Market Roundup

In Will Taiwan LCD Makers Move to China? we observed that Taiwan panel makers may move to China and we also noted China's struggle in developing the LCD market. Although legislation being passed is for lower generation plants, it seems some Taiwanese panel makers are still interested in Taiwan. Reuters reports AU Optronics will invest in a new 10G plant in Taiwan. Reuters wrote:

AU Optronics would invest at least T$400 billion ($12.7 billion) to build four new LCD plants after Taiwan's government makes a decision on the location of a new production zone, a local newspaper said on Wednesday.

AU Optronics, the world's third-largest LCD maker, has invested T$600 billion in the industrial science parks in central Taiwan, and AU would build four LCD factories using more advanced generation 10 and above technology, the Economic Daily News reported, without citing sources.

Later on Wednesday, Taiwan's government is expected to choose a site where local companies can expand production from one county in central Taiwan, the Chinese-language newspaper said.

An AU official would only say that the company needs a large piece of land where it can build new plants over the longer term. AU, which competes with larger rivals Samsung Electronics and LG Display of South Korea, has said it is planning to build a new state-of-the-art LCD plant to tap future demand for flat-screen televisions.

However, a current inventory oversupply and a decline in demand has caused a downswing in the panel market as a whole. Digitimes notes this downturn may have a negative effect on the LCD driver IC design houses. Digitimes observed:

Taiwan TFT-LCD panel makers believe falling price for panels will be end by the end of August. However, the panel makers are looking to reduce average prices on their components, placing pressure on Taiwan LCD driver IC suppliers, which are seeing disappointing order visibility, casting a shadow on their sales growth and margin expectations for analog IC design houses this quarter, according to market watchers.

The sources mentioned although LCD driver IC suppliers expect sales in the third quarter to grow from the second quarter, the range of growth has shrunk about 50% this year. In addition, TFT-LCD panel makers usually implement a cost-down strategy when demand is weak, meaning driver IC suppliers have to cut their prices by 10-15%. Therefore, Taiwan LCD driver IC design houses are facing the pressure of both disappointing sales and declining margins.

The downswing in the market has also caused delays in China developing their LCD panel market and has led Digitimes to question whether the next generation fabs will be developed in China. Digitimes notes in a commentary:

There have been talk coming out of China about Shanghai-based SVA Group planning to build its 6G LCD panel plant. But while the panel market is being hit by a price slump, as well as worries about serious over-supply emerging next year when major makers ramp up their next-generation productions, one cannot help but wonder how soon SVA will kick off construction of its 6G plant, if it ever materializes at all.

Since last year, reports coming from China's media have almost invariably indicated that SVA is going for a 6G line for its next-generation project, in line with government directives concerning the feasibility of panel production at the generation.

But such a project has been dogged by a persistent sense of uncertainty. Just last month, SVA was said to be considering teaming up with Sharp to build a 7.5G LCD plant in China while abandoning its original 6G plan. The 21st Century Business Herald, which made the claim, indicated that while SVA already obtained government approval to build the 6G line with a ground-breaking ceremony having been scheduled for September 28, over-supply from the world's 6G capacities was causing the company to consider skipping 6G in its production migration.

Of course these rumors have been denied and China still says the original 6G fabs will be built.

Not all is doom and gloom for the panel market though. iSuppli is predicting the large panel market sector will pick up. iSuppli observes:

After nearly three months of plummeting profitability and precipitous price plunges, the large-sized LCD panel market finally is due for a recovery in September, iSuppli Corp. predicts.

“The large-sized LCD panel market has been mired in a state of severe oversupply since the start of June, due to lower-than-expected panel demand and high inventory levels throughout the supply chain,” said Sweta Dash, director of LCD and projection research at iSuppli. “Conditions have worsened in August, with poor economic circumstances causing prices to decline at an even faster pace than before. However, panel production cuts, combined with the clearance of inventory and a recovery in demand from televisions, desktop PC monitors and notebook PCs are expected to shift the supply/demand equation back to balance in September. This will lead to a recovery in pricing.”

iSuppli defines large-sized LCD panels as those having a diagonal screen dimension of 10 inches or larger.

It seems the panel sector, like increasingly more sectors in the global economy, is struggling. Although there is good news about the potential recovery of the large screen sector and optimistic investments by AUO in Taiwan, the market is still struggling. Some believe a global meltdown is just around the corner. Of course, predicting the future is difficult, so we won't try.

Reuters: Taiwan's AU to invest T$400 bln in new LCD plants -paper
Digitimes: LCD driver IC design houses feeling the pain of panel makers
Digitimes: Are China's next-generation LCD fabs really coming?
iSuppli: Large-Sized LCD Market Set for September Recovery

Silliness is.....The Chen Scandal and Declining Share Prices

I was really amused to read this article on the China Post.

Taiwan's share prices plunged yesterday, as banking shares led the decline in the wake of a money laundering scandal involving former president Chen Shui-bian and his family.

By the close of trade, TAIEX, the market's key barometer, decreasing 195.76 points to close at 7,000.74.

The local bourse opened at 7,189.68 and fluctuated between 7,213.69 and 6,996.78.

A total of 3.59 billion shares changed hands on market turnover of NT$82.84 billion. The three major institutional investors registered a net sale of NT$9.09 billion, breaking down into a net sale of NT$6.32 billion by foreign investors, net sale of NT$1.575 billion by asset management firms, and net sale of NT$1.194 by securities firms.

Banking and financial shares dropped by an average of 4.8 percent, on fears some financial institutions may run into trouble in the wake of Chen's money laundering scandal.

Fair enough, there may be some nervousness about the banking sector but to honestly blame the declining stock prices on Monday on the Chen scandal is insane. Forty-eight (48) of the fifty-eight (58) companies listed on the TSEC Taiwan Technology Index also saw declines in their share prices and I assure you this has more to do with future supply and demand than the Chen scandal. Some tech companies saw declines larger than 6%. This is not to mention the declines in stock markets around the region. Reuters reported on the decline in the HK stock market on Monday saying:

Hong Kong shares fell 1.2 percent on Monday, with the main index hitting a new 5-month low, as China coal stocks slid after a hike in export taxes on the commodity and mobile phone maker Foxconn International (2038.HK: Quote, Profile, Research, Stock Buzz) plunged 19.6 percent after a profit warning.

Furthermore, declines on the Dow Jones on Friday, a storm threat in US and increases in the oil prices and the continued trouble of Freddie Mac and Fannie Mae combined with inflationary data pouring out of the states suggests there perhaps were other forces putting downward pressure on the shares.

I would suggest the declines in the banking shares on Monday were in fact more to do with the possible continued exposure of Taiwan firms to US companies engaged in sub-prime mortgages (on this I may be wrong as I am not in the banking sector and don't follow it too much) and investments in Freddie Mac and Fannie Mae. Reuters wrote earlier this year:

Taiwan's banks and insurers had invested a total T$97.2 billion (US$3.0 billion) in U.S. subprime-related products with losses of T$23.7 billion as of end of December, the island's financial regulators said on Wednesday.

The losses, realised and unrealised, were reported by 21 banks and 12 insurance companies from their subprime and structured investment vehicle (SIV) debt, which is backed by subprime mortgages, the Financial Supervisory Commission said in a statement.

Also, considering the index has been bouncing around the 7000 mark for the last few weeks is indicative of the value shareholders are putting on the market index. It is doubtful they will let it go much higher than 7000 or lower than 6800 (I might be wrong here) but 7000 seems to be the equilibrium price (if such a thing really exists) right now. Haven't the writers at the China Post heard of efficient markets? Perhaps not!

I would suggest there are more significant reasons for the decline in the stock prices than the Chen scandal. Rather blaming Chen for all the woes in the economy for the next hundred years and trying to scandalize the man more rather than finding proactive ways to help the economy and the share prices out of their current nose dive is stupid.

If, however, the China Post IS going to lay the decline of the share prices on Monday at Chen's door, then they must surely blame President Ma for the dramatic decline of the index from more than 9000 at the time of his election to its current 7000 mark, but they would never do that now would they? (Just to be clear, I don't blame President Ma, I think the declines are indicative of the current global economic conditions)

Blaming the Chen scandal for stock price declines is the same as blaming the stock price drop on the rout of the Boks by the All Blacks (19-0) on Saturday night. But hey, what do I know?

P.S. Yesterday the Dow Jones dropped 1.14%, the NASDAQ 1.35%, the S$P500 0.93%. If Taiwan stocks drop today it is nothing to do with Chen.

The China Post: Shares plunge in wake of Chen scandal
Reuters: HK shares down on China losses; Foxconn plunges 20 pct
Reuters: Taiwan firms had US$3 bln in subprime exposure by end-Dec

Nanya and Micron Joint Venture

CNN Money reports Nany and Micron have entered into a 50-50 joint venture to develop memory chips. CNN writes:

Nanya Technology Corp. (2408.TW) said Tuesday it injected another NT$1.37 billion into MeiYa Technology Corp., a joint venture with U.S. chip maker Micron Technology Inc. (MU).

The injection raises Nanya's total investment in MeiYa to NT$2.57 billion, Nanya said in a statement.

Nanya, Taiwan's second-largest memory-chip maker by revenue after Powerchip Semiconductor Corp., and Micron said in April they would each invest US$550 million to set up the 50-50 joint venture, which will make memory chips widely used in personal computers.

The two companies agreed to complete their fund injections in MeiYa by the end of 2009.

MeiYa, based in Taoyuan, northern Taiwan, will start mass production in 2009 with a monthly capacity of 45,000 wafers.

CNN Money: Nanya Technology Injects NT$1.37 Billion In Chip Venture With Micron

Cost Declines in PCB Materials

Digitimes notes that costs for PCB materials are declining. Digitimes writes:

Printed circuit board (PCB) makers may see their profitability improve as soon as the fourth quarter of 2008 as prices of key materials, which include solder paste and copper clad laminates (CCLs), are declining.

Industry players indicated that the price of tin, the key raw material for solder paste, has declined to US$19,000 per metric ton recently, down from US$22,000 late in the second quarter. Once the price drops to US$19,000 or below, pressure for a price adjustment surfaces, they said.

Later Digitimes observes the decline is not due to price adjustments for copper but as a result of increased inventory. These price declines is good news for the entire computer value chain I suppose, and especially for motherboard makers. They will either be able to increase their profit margins or, as is so typical in Taiwan, compete more aggressively on price, which is good news for you the consumer. We will have to wait and see now, won't we?

Digitimes: PCB material costs on downhill trend

Touch Panel Market Growth

EMS Now has an interesting take on the Touch Panel Market. EMS Now writes:

Several makers of touch panels in Taiwan are expected to benefit from the booming global market for such panels, which is forecasted by DisplaySearch to grow 43.2% to reach US$1.8 billion this year.

Some institutional investors said Wintek Corp. is sure to turn profitable in August thanks to increasing shipments to Apple, Motorola, High Tech
Computer Corp. (HTC) and some portable navigation device (PND) makers.

Statistics compiled by Display Search, the worldwide leader in flat panel display (FPD) market research and consulting, showed that the global touch-panel market sales reached US$1.2 billion in 2007 and would increase to US$1.8 billion this year. Currently, the market share for increasingly-hot capacitor-type touch panels is about 12%, up from 9% in 2007. This indicated that cellphone touch-panels would be the major growth momentum in the global market and capacity-type technology would become the mainstream in mobile-telecom panel applications.

EMS Now continues saying:

Wintek chairman and president Hyley Huang pointed out that thanks to increasing orders from Motorola, Compal Communications Inc., and Qisda Corp. his company's B/B (book/bill) ratio outstripped 1 in June and rose to 1.3 in July. He added that Wintek's revenue growth momentum would come mainly from touch panels, thin film transistor-liquid crystal display (TFT-LCD) panels, and color super twisted nematic (STN) products.

Currently, Wintek is the world's largest supplier of black-and-white STN panels, the production value is declining along with the falling product prices.

I am glad for Wintek that they are seeing a way out of the mess they are in. They were hammered by declines in demand from Motorola when Motorola started to fall apart earlier in the year (see Motorola Affecting Downstream Suppliers.

The touch panel sector is indeed a growing market. More and more market sectors are demanding touch screen applications. In the idustrial PC sector we are seeing increased applications accross the full spectrum of products including kiosks, gaming machines, point-of-sales systems, automation devices and human machine interfaces.

There will certainly be an increased demand for touch panels on personal computing devices and it seems Wintek, and other companies, may be in a good position to leverage their current advantages and to work their way out of their slump.

EMS Now: Touch-panel makers eye growing global market

Panel Makers Focus on PND

Well the LCD industry it seems has followed the memory industry into a downswing. This has resulted in some companies realigning their focus and strategy. Some of the small-to-medium size panel makers are according to Digitimes hedging unstable demand in the digital frame and low cost PC markets by targeting the portable navigation device (PND) sector. Digitimes writes:

While AU Optronics (AUO) and TPD Displays have been the major LCD panel suppliers for portable navigation device (PND) applications, weakening small- to medium-size panel demand has made other LCD panel makers look to the segment as well, and prices are expected to drop accordingly, according to market sources.

With panel sizes for digital still camera (DSC) and PND applications being of a similar size and with an OEM customer base being concentrated in Taiwan, Taiwan panel makers have an opportunities to make headway in the PND segment. While demand growth in the PND market is slow, it is steady and stable, unlike the fluctuating orders seen in the digital photo frame and low-cost PC segments, the sources noted. However, prices for PND panels are expected to drop in the second half of the year.

Digitimes continues further on saying:

Chunghwa Picture Tubes (CPT) and Innolux are focusing on low-cost PC and PND panels for small-to-medium size product in the second half of the year, Wintek also entered the supply chain for PND panels in the second quarter. CPT indicated that demand for PND panel will grow but the overall price for small size panel will continue to drop.

Well I suppose they have to do something. They cannot just sit around and hope for the best.

Digitimes: LCD panel makers turning to PNDs for new orders

Wirless NAS

I used to work in the storage industry and therefore have a latent love of storage devices. They are the backend products that nobody ever sees or hears about but are the heart and soul of all networks. Everyone knows about servers and routers but few people know about RAID storage devices. I therefore enjoyed reading about ACER's newly released wireless Network Attached Storage (NAS) system.

Acer Computer Australia has released the Aspire easyStore; an intelligent network storage solution designed for small, medium and home office network environments.

The wireless accessibility is a major differentiator from other similar products in the market. With integrated 802.11b/g the Aspire easyStore has the ability to work as a wireless access point with no network cabling required. The product also offers Gigabit LAN connection for data transfers.

While the Aspire easyStore offers a large storage capacity (up to 4TB using 4 high capacity hard drives), the device is still simple to setup and manage through an intuitive web browser based user interface.

The Aspire easyStore features integrated iTunes and UPnP AV Media Server allowing the capacity to stream photos, music and videos to UPnP AV client devices such as a Playstation and share files amongst mixed OS users. The device includes RAID control enabling protection of files, supporting levels of 0, 1, 5 and JBOD. easyBackup software enables automatic client backup and system recovery if a hard drive fails, file corruption or accidental file deletion occurs or in the event of virus attacks.

Yeah, I know it is all marketing blurb but imagine having wireless access to a 4.0 TB hard disk! Pretty cool huh! I think so. Why is this important? Well, consider the netbooks (low cost PCs). They only have limited storage available. Their advantage being they are cheap, small and easy to carry. However, you still have tons of data you want to access but plugging in a USB cable to an external hard disk is just irritating right? Well this is the answer to all your storage dreams. Hey, if I can persuade the better half I might buy one....grin....ok, not neccessarily the ACER...

Tweak Town: Acer debuts wireless NAS solution

Intel Shifts the Memory Controller

Intel have finally moved their memory controller from the graphics memory and controller hub (GMCH) a.k.a. Northbridge chipset onto the processor allowing faster access to memory resources by the processor and combining both the processing and memory control functions. Bloomberg reports:

Intel Corp., the world's biggest semiconductor maker, today showed off a new chip that has direct access to memory in computers, invading one of the last market niches dominated by Advanced Micro Devices Inc.

Intel for the first time is combining the memory and processing functions into a single chip, instead of using two. The result is a processor that helps pull up data and perform calculations faster. Other features boost the ability to handle video and sound files, and share work among computers.

While AMD has had a memory-controlling chip on the market since 2003, new processors using the design were delayed and didn't catch on with customers, analyst David Wu said. Santa Clara, California-based Intel will have a performance lead until 2010, he said.

As the article notes, this used to be AMD's domain. Intel have now caught up. It definitely seems Intel is on the attack on all fronts. In Nvidia vs. Intel we highlighted how Intel was aligning their sights on Nvidia by challenging Nvidia's core graphics technology strength. One wonders how far Intel can stretch themselves? It is difficult to see any company overtaking Intel now. They will be the dominant player for years to come. I don't think this is good myself and as I have said in the past, I hope to see a strong, competitive AMD rebound and continue to push Intel. This is good for the consumers.

The situation is very similar to Microsoft. They have hardly any challenegers and are therefore able to release flawed operating systems such as Vista. It is doubtful they would even consider sending out Vista with flaws if there was a viable competitor on the horizon. Market dominance does not neccessarily mean better products. It only means less alternatives and that the company with all the money, even with inferior products, can crush any competitor with better offerings. Do I sound lie a cheerleader for the open source crowd? Don't mean to!

Bloomberg: Intel Invades AMD Niche With Memory-Controlling Chip

Free ASUSTek Netbook...

...bundled in a two year 3.5G online service contract. ASUSTek are still working to change the PC landscape!

Last week we noted in Bundling Netbooks with Telecom Offerings how both ACER and ASUSTek are negotiating with telecoms to bundle free netbooks with long term online contracts. Digitimes now provides more details about these contracts. Digitimes writes:

Asustek Computer is cooperating with Orange to push out a free Eee PC bundle in the UK market, according to the company.

Asustek is offering its Eee PC 900, which features a Celeron M processor, 8.9-inch panel, 16GB hard drive and Windows XP operating system, in the bundle deal. The deal requires a two-year 3.5G online services contract with Orange, which will cost an average of £25 (US$46.71) per month.

The bundle deal should help ease Asustek's Eee PC 900 inventory pressure.

First thing to note is how ASUSTek are innovating in the way they sell these netbooks. Although they still sell the netbooks directly into the channel, they are also using the netbooks as a value-added component of a telecom deal. This approach to selling is completely different to the normal way of selling PCs and shows how ASUSTek are positioning the product. The product is being positioned as a mobile internet device (MID) and not as a PC. Of course, there are fears these devices may cannibalize notebooks but by positioning them as MID they are trying to put them into their stand alone market segment or develop them as an extension of their smart phone offerings.

Although bundling computers with internet contracts is innovative, the selling strategy will not be new to ASUSTek or ACER. They have, afterall, been selling their smartphones into this channel for a while now and may therefore leverage the contacts they have made in the sales of the smartphones for the sales of the netbooks.

The netbook revolution may have a long way to go before it runs out of steam.

Digitimes: Asustek works with Orange to release free netbook bundle in the UK

D-Link Wireless Digital Photo Frame

One of our first few posts on Hi Tech Taipei was about wireless digital photo frames that could connect to the internet. Well it seems these products have indeed arrived and Small Business Computing reviews the D-Link frame. Small Business Computing says:

Digital picture frames—LCD panels that sit upright on a table or shelf, or hang on the wall to display images—are a cool idea, and they’ve suddenly become a hot consumer item. But most are a pain to use.

They rarely have enough onboard memory to hold a reasonable selection of photos and the only way you can add pictures is by inserting a camera card or, in some cases, plugging in a USB drive. Most are also pretty much single-application devices: displaying locally stored images is all they can do.

D-Link is trying to change that. Its DSM-210 Wireless Internet Photo Frame ($290) connects to a home (or office) Wi-Fi network and lets you pull images from computers on the network. It connects to the Internet, as well, to pull images and information from the Web, including from photo sharing and social media sites, such as Flickr, Picasa and Facebook.

You can also control the DSM-210, in limited ways, over the network from a PC using a Yahoo widget developed by D-Link for the purpose. The DSM-210 is not perfect, but it’s a creditable first foray into a new product category for D-Link. The wireless and Internet features make it a big improvement on most other digital frames out there.

That said, D-Link was not the first with a Wi-Fi picture frame. Kodak introduced wireless frames two years ago, though without the Internet functionality. And there are others available now as well. The wonder is that manufacturers don’t include Wi-Fi on all or at least more of their products. It makes the device so much more useful and convenient.

D-Link originally unveiled the DSM-210 in January, but then went back to the drawing board to refine the product. It’s finally available now for $290 from the company’s Web site.

Well its nice to see these products are rolling out. I must say I do agree with the author. My digital photo frame has NO memory and requires an external memory device to be plugged in and kept in the frame to show the pictures. Yes, we have one of the older ones. Extending the capabilities of the photo frame to access the internet provides incredible convenience to end users. I suppose the inhibiting feature for including wireless internet on each frame might be the cost of the wireless chip and/or design and development costs. That said, I am not sure if these are the real reasons. I will probably now wait for the 3rd or 4th generation of wireless internet frames before making my next purchase. Let them iron out the problems first.

Small Business Computing: D-Link Wireless Internet Photo Frame

Wireless USB

The wireless USB market is still in its infancy and competes directly with the bluetooth protocol (see Wikipedia page). Global Sources Computer Products says the wireless USB market is still an early adopters market with very few companies providing entering the market. Global Sources writes:

Wireless USB remains an early adopter’s market, with only a handful of players actively pursuing the line worldwide. High product development and manufacturing costs, plus the small supply of PCs integrating Wireless USB modules or ports, are currently the major roadblocks to adoption. In Greater China, very few companies have ventured into the market, and few finished products have rolled out from the drawing boards.

The slow market penetration could, however, start gathering pace in the next few years, as Wireless USB builds on the market leadership of USB. Data from Taiwan’s Industrial Economics and Knowledge Center (IEK) indicate that more than 90 percent of PCs worldwide adopt USB 2.0. In fact, PCs and related peripherals are expected to be the initial applications of the Certified Wireless USB interface, after which it can expand into mobile and consumer electronics products, such as digital still cameras, A/V players, smart phones, game consoles and PDAs, where USB has also established roots. In the mobile phone sector, Wireless USB is forecast to influence only the smart phones and PDA phones, whose design allows for an additional module.

Market projections from iSuppli place the total market value of Wireless USB at $2.6 billion by 2011 from $15 million in 2007. The most aggressive promoters are chipset providers, such as Taiwan Realtek Semiconductor Corp. and Faraday Technology Corp., and other foreign suppliers, such as NEC and NXP Semiconductors. NXP Semiconductors, for instance, plans to invest €90 million (approximately $140.44 million as of press time) in its Singapore facility for the development of Certified Wireless USB chipsets for use in laptops, mobile phones and consumer electronics products. PC suppliers Dell and Lenovo have also joined the pioneers in this market.

From US$15 million to US$2.6 billion in four years shows the huge growth potential of this market over the next few years and it will not be surprising to see more and more fabless design houses moving into this market.

Global Sources: Budding Wireless USB supply market rides on USB popularity