Taiwan's Electronic Industry Environment to See Big Changes: TRi
2013/08/27 | By Quincy LiangThinning margins and shrinking global notebook shipments plague PC sector
Economic growth rates of major global markets, including Europe, the United States, China etc. are slowing or even trending downward in 2013, which will impact demand for consumer electronics especially in the second half, according to Topology Research Institute (TRi), a major private market-research firm in Taiwan.
Simon Yang, president of TRi, says Taiwan's electronic industry environment is to see some big changes: the irreversible down-turning contract manufacturing businesses of notebook PCs, LCD TVs and cellphones, due mainly to inadequate shipments of branded vendors.
However, Yang said, the display, DRAM, LED and Photovoltaics (PV) industries are reporting some positive signs that will generate brighter prospect.
TRi says the biggest challenge for local notebook PC industry is no longer thinning profit margins, but drastically shrinking global notebook PC shipments; as well as the "winners take all" phenomenon in the global cellphone and TV market by Samsung and Apple, which endangers survival of players outside the top-three. The severe challenges are forcing the electronic industry in Taiwan to transform thoroughly and seek new niches.
Branded Vendors Too
Local branded vendors, mainly Acer, ASUS and HTC, also face different challenges, TRi says.
According to TRi's analysis, Acer's transformation into the tablet PC and smartphone segments was relatively late, and the company's hardware development and innovation have not grown into strong-enough tactical deployment. In addition to touch-control functionality, the research firm says, Acer should focus more on innovative camera-module applications to evade fierce price-cutting competitions.
HTC, the largest smartphone vendor based in Taiwan, is facing shrinking shipments this year, due to major rival Samsung's aggressive marketing programs, as well as rapid rise of Chinese counterparts such as Huawei, Lenovo etc. backed by the big market in China.
Maybe the only exception is ASUS, TRi says, which has been rapidly venturing into new market niches in these two years thanks to its hardware innovation efforts to push innovative tablet PC and smartphone products. TRi forecasts that ASUS will maintain sales growth in the second half.
Pessimism does not blanket the local electronic industry, TRi said, however, because the so-called 3-D (display, DRAM and LED) and 1-S (solar panel, or PV) industries are expected to rebound in the second half and strong demand is predicted to last through at least the first half of 2014.
| 2012H1 | 2012H2 | 2013H1 | 2013H2 | 2013H2 (YoY) | 2012H2/2013H2 Profitability | |
Shipment Value | Large-sized FPD Panels | US$13.1 B. | US$14.2 B. | US$13.8 B. | US$15.1 B. | 6.34% | Profitable |
DRAM | US$2.4 B. | US$2.21B. | US$2.93 B. | US$2.88 B. | 30.3% | Profitable | |
LED | US$1.46B. | US$1.62B. | US$1.61B. | US$1.69B. | 2.23% | Profitable | |
PV | US$2.25 B. | US$1.85B. | US$1.68B. | US$2.31B. | 25.1% | Profitable | |
Shipments | Cellphone Brand | | | | | -7.45% | Decline 15.8% YoY Drop for 2013 |
Cellphone Contract | | | | | 0.46% | Flat 7.3% YoY Drop for 2013 | |
Notebook PC Brand | | | | | 10.5% | Growth 6.4% YoY Drop for 2013 | |
Notebook PC Contract | | | | | -3.3% | Minor Decline 9.9% YoY Drop for 2013 | |
TV Contract | | | | | -3.8% | Minor Decline 2.2% YoY Drop for 2013 | |
Source: TRi, June 2013 | |||||||
1. Increasing Tablet Shipments, Decreasing Notebook, TV Delivery
In conjunction with the continued demonstration of new tablet PC models by international brand vendors, TRi forecasts that Taiwanese tablet PC contract manufacturers' shipments in the second half will grow clearly. Among major players, Pegatron Corp. and Compal Electronics Inc. are to be the most eye-catching contract suppliers, because the former will continue to supply iPad minis to Apple, while the latter will encroach on shares of major counterpart Quanta Computer Inc. of Taiwan.
The global notebook PC and LCD TV markets are to slow this year, and shipments of major notebook PC brands, such as HP and Dell, as well as TV brands Sony, Toshiba, Sharp etc., are estimated to be lower than previous year's. So, TRi forecasts that the shipments of local notebook PC and TV contract assemblers will shrink modestly this year.
2. Recovering FPD Industry in 2nd Half
The global flat panel display (FPD) industry faces "OK" demand in the second half, as the demand from tablet PCs will be strong, while that from LED TVs maintain growth, though that from information technology (IT) applications, especially from PC monitors, will decline. The penetration of touch-control notebook PC models did not meet the original expectation in the first half, TRi says, however, the new segment is expected to rapidly expand in the second half in conjunction with all major brand vendors' launch of new products. TRi estimates that the touch-control notebook PC panels are expected to bring some profits to local panel suppliers.
The ultra HD panel has become a hot topic in this year's FPD industry, driving all major thin film transistor-liquid crystal display (TFT-LCD) panel makers to focus on such products, which feature 4KX2K resolution, super-narrow edge trim, high-penetration open cell, super-high resolution, IPS (In-Plane Switching) / FFS (Fringe-field switching) technology, super lightweight and thin, wide color rendition, up-scaling integration, touch control, mechanism integration etc. Though staying in a recovering industry, TRi warns that local panel suppliers still face threats from transformed counterparts in China and South Korea.
3. Stronger Demand for LEDs
Continuing increasing demand and few new production capacity in 2013 will ease oversupply and drive the LED industry toward healthier development. TRi analyzes that several positive signs are driving the LED industry in the second half, including the increasing shipments of tablet PCs, the uprising penetration of LED TVs (about 90% this year, compared to 79% in 2012), and the expanding average screen size of such TVs (to 37.2-inch, 35.6-inch), all are expected to upgrade demand for LEDs.
The public illumination market is also driving LED makers' revenues. According to TRi, the LED industry in Taiwan will enjoy smooth growth in 2013, due to many government projects to be completed by contractors in the second half; various branded vendors' pushing family-use LED bulbs; increasingly strong demand from commercial, public and industrial illumination applications etc..
4. Rising PV Revenues
Taiwanese PV manufacturers benefit from the anti-dumping sanctions adopted by European Union (EU) and the U.S. against Chinese counterparts, with revenues to gradually increase to offset losses or even generate profits.
TRi points out that EU's anti-dumping sanction applies to all PV silicon chips, batteries and components, compared to only on batteries by the U.S., so Taiwanese suppliers now have good chance to take Chinese counterparts' market share. In addition, the rising PV market in Asia, especially in Japan, will also bring more lucrative business opportunities to local PV makers.
However, the market research firm stresses, Taiwanese PV suppliers might elevate product prices and upgrade utilization rate, but face possible price hikes in poly-silicon materials.
5. DRAM Production Capacity Shift
In 2013 many DRAM makers shifted PC DRAM production capacity to mobile DRAM or/and NAND flash products, leading to supply-demand imbalance and price hikes of PC DRAMs and memory cards.
According to TRi, the annual shipment growth rates of smartphones and tablet PCs are expected to reach 26% and 42%, respectively, driving demand for DRAMs. Though the memory capacity of Android 32-bit system has reached its ceiling of 2GB/unit, TRi said, yet the 64-bit-platform devices are not expected to be launched in consumer market in the short term. On the other hand, demand for PC DRAMs is decreasing, so the DRAM demand and supply will reach balance in the second half, rather than a supply shortage leading to price hikes.
A major newspaper reports that Taiwan has lost its lead in consumer electronics due to insufficient innovation, slower response, and even faces a serious bottleneck. Despite such uncertainties ahead, TRi says, the electronic industry in Taiwan is reputed for flexibility and ability to survive crises.