Is there any good news out there? More depressing news about the state of Taiwan tech sector and economy in general. The China Post reports top Taiwanese companies are embarking on strict belt tightening measures including forced unpaid leave one day a week. According to the China Post:
TAIPEI, Taiwan -- An increasing number of leading local enterprises, including Formosa Plastics Group (FPG) and high-tech Taiwan Semiconductor Manufacturing Co., have resorted to severe belt-tightening measures to tide over the sharp business decline, according to industry sources.
Confronted with sharp business shrinkage, Formosa Plastics Group (FPG), Taiwan’s largest business conglomerate, has decided to reduce capital outlays for 2009 and have started to carry out de facto pay cuts.
FPG, under the instruction from its chief executive officer (CEO) Wang Wen-yuan, will slash capital outlays for the petrochemical sector by 30%, amounting to several tens of billions of NT dollars, including NT$30 billion of reduction for Formosa Plastics Corp., the flagship firm of the group, alone.
In addition, FPG is studying whether to expand the implementation of de facto pay cut, in the form of mandatory unpaid leave, inside the group. Presently, the employees of Nan Ya Technologies and Inotera Memories, the group’s two subsidiary DRAM (dynamic random access memory) makers, are already to take one day of mandatory unpaid leave after every five working days. This is the first time for the group to carry out the practice since 25 years ago, when it also embraced a similar measure amid the global oil crisis.
Meanwhile, the TSMC, the world’s leading IC foundry, announced on Wednesday the implementation of four days of mandatory unpaid leave per month, in addition to elimination of managerial allowances. This is deemed tantamount to a 15 percent pay cut for all employees.
In the mean time Computer World reports research firm IDC predicts a few small PC manufacturers will disapper. According to Computer World:
(Computerworld) With credit in a tight squeeze and the economy in free fall, the next few years should see the collapse of some small PC makers and a restructuring of the rest of the industry, according to an industry research firm.
Richard Shim, personal computing research manager at IDC, told Computerworld that he expects a consolidation of the market. However, he doesn't think that the big PC players, like Hewlett-Packard Co., Dell Inc. and Acer Inc., will gobble up smaller hardware vendors. Instead, he said those smaller players will simply fold up shop as the faltering economy keeps companies and individuals from buying new computers.
"It won't be so much about acquisition but the smaller players will just go away," said Shim, adding that he thinks the industry could lose fewer than 10 companies. "The big players are feeling the hurt as well. Right now, everybody is beating each other up in price. If some are going to die off anyway, what's the sense in buying them?"
Another company slashing forecasts is Mediatek, the largest mobile phone chipset maker in Taiwain. According to the Taipei Times:
In its filing to the stock exchange yesterday, MediaTek said revenue may plunge by more than 30 percent this quarter from NT$28.05 billion in the third quarter, rather than a decrease of between 9 percent and 16 percent estimated in October.
“The global financial storm has started to impact on demand in the emerging markets. End demand for all products is lower than expected,” the Hsinchu-based firm said in the filing.
The DRAM industry however is receiving some help from the local government. Although the government probably won't bail out all the DRAM companies, they are looking at ways to help the sector as a whole. According to the IT Examiner:
The Council of Economic Planning and Development (CEPD) now plans to actively promote a consolidation intitative for the ailing industry. According to CEPD chairman Chen Tain-jy, the government will also grant financial aid to manufacturers capable of developing indigenous and competitive technology.
"The plight of the DRAM industry is very much known to the government and we are taking effective measures to help. We will be very careful about doing the kind of capital injection the US is doing," explained Taiwan President Ma Ying-jeou.
Ma also acknowledged the importance of the DRAM industry in Tawian.
"Their (manufacturers) fall would not only affect the IT industry but also our banking system as well. We understand that very well. The premier and even the vice president, Vincent Siew, are involved in trying to figure out a plan for their survival," said Ma.
There is a lot of other bad news out there. Foxconn will reporterdly lay off as much as 40,000 people in China and other companies in Taiwan are laying off a significant amount of their work force. It is sad that there is nothing these companies can actually do to help themselves. Taiwan's tech sector is export dependent with most of their money coming from sales in the US, China, Japan and Europe. With the US, Japan and Europe in (or almost in) a recession, and slowing growth in China, the tech sector here wills struggle to kick itself out. All they can do is cut costs, improve efficiencies, cut back on excessive CAPEX and continue to develop and consolidate their competitive advantage. If they do this, when the slump is over they will be ready for the new fight.
Once again I believe the world economic order will be drastically readjusted after this crisis comes to pass and I am very interested to see how it affects the tech sector in Taiwan. Of course I have many friends working in and around this industry in Taiwan and so I am hoping for their sake and the sake of Taiwan's economy these companies can survive and endure. But the short-mid term will be tough.
The China Post: Top businesses adopt belt-tightening measures
Computer World: IDC: Economic crisis will kill off some PC makers
Taipei Times: MediaTek slashes fourth-quarter sales estimatesMediaTek slashes fourth-quarter sales estimates
IT Examiner: Taiwan nixes wide-scale DRAM bailout
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