Slow Down in the Tech Industry

It had to happen eventually. The financial crisis in the States will effect every sector of the global economy. Some sectors will be more affected than others and some industries may take longer to feel the effects than others. The tech industry here in Taiwan is starting to feel the pinch.

EE Times notes:

Based on some key indicators from Taiwan's chip and PC houses, the signs in the IC industry are going from bad to worse.
ASE, Global Unichip, UMC and others posted lackluster sales figures for August. Taiwan PC assemblers Compal, Wistron and others reported mixed results in the channels.

But that's not what the doctor ordered amid a slump--and overall slowdown--in the IC sector. Recently, for example, Gartner Inc. lowered its IC forecast in 2008 and 2009.

In one indicator, Taiwan foundry provider United Microelectronics Corp. (UMC) reported net sales of NT$8.165 billion ($256 million) for the month of August, down 21.74 percent from a year ago and down 4.35 percent from July of 2008.

Taiwan chip-packaging giant Advanced Semiconductor Engineering Inc. (ASE) reported net revenues of NT$8.781 billion ($275.4 million) for August, up only 0.8 percent from July of 2008 but down 6.5 percent from a year ago.

Not all was doom-and-gloom in Taiwan. ASIC provider Global Unichip Corp. said its August revenues were up 7 pecent from July 2008 and up 37 percent over last year.

On the PC front, the signs are mixed among Taiwan's ODM giants, such as Quanta Computer. Quanta makes notebook PCs on an OEM basis for many PC makers.

"Sluggish corporate notebook PC markets in both North American and Europe negatively impacted Compal's shipments, offset by growing consumer notebook in Eastern European and emerging markets," said Daniel Amir, an analyst at Lazard Capital Markets, in a report.

"Despite weaker-than-expected European markets, Quanta maintains its full year 40 million notebook shipments guidance (26 percent increase over 2007), as the demand from emerging markets remains solid," Amir said.

"August shipments were flat or slightly up versus July. We forecast 10 percent growth month/month in September, following a 3 percent increase in August and 20 percent quarter/quarter growth both in 3Q and 4Q," he added.

Another Taiwan PC assembler, Wistron, "raised its 3Q shipments estimate to 5.8 million from 5.4 million, 25 percent quarter/quarter," he said. "Wistron is tracking ahead of the industry average, as it is gaining market share from other notebook ODMs."

Additional bad news for Taiwan Semiconductor Manufcaturing Corp. (TSMC) is that a few investment banks (aren't they extinct yet?) have downgraded forecasts for TSMC. Digitimes observes:

A number of investment banks, including Friedman Billings Ramsey (FBR), HSBC and Merrill Lynch, have issued a conservative guidance over the prospects for Taiwan Semiconductor Manufacturing Company (TSMC) in the fourth quarter of this year.

FBR expects an 8-10% sequential decline in TSMC shipments in the fourth quarter due to order cuts from a number of sectors, including games consoles, digital video equipment, STBs, DVDs, flat panels as well as Bluetooth chips.

TSMC is likely to see its shipments continue to decline 5-10% sequentially in the first quarter of 2009, FBR added.

HSBC expects TSMC's capacity utilization rate to fall to 75% in the fourth quarter and further decline to 65% in the first quarter of 2009 – the lowest level in recent years.

While forecasting TSMC's revenues are to drop 18-22% sequentially in the fourth quarter, Merrill Lynch also lowered its projection for TSMC's EPS (earnings per share) for 2008 from NT$4.11 to NT$3.68 and cut its target TSMC share price from NT$60 to NT$57.

Digitimes notes additional concerns in the IC sectory saying:

Due to the global economic downturn, consumer electronics, handset and notebook makers are more conservative about demand in the fourth quarter. With unclear order visibility, Taiwan IC distributors estimate fourth-quarter orders are to decline 10-20% compared with earlier expectations.

Despite low expectations for the third quarter, earlier some IC distributors were still optimistic about the outlook for the year-end holiday season and forecast sales growth of 20-30%.

Yeah. It had to happen and now it has. Nobody is immune!

EE Times: Taiwan IC, PC results point to slowdown
Digitimes: TSMC bracing for gloomy prospects in 4Q08, say investment banks
Digitimes: Taiwan IC distributors estimate orders down 10-20% on earlier expectations in 4Q08