The revenue of Taiwan, China technology companies dropped the most in ten years

Source: Semiconductor Circle Author: Today‘s Semiconductor

    The decline in chip and PC sales has had a significant impact on the technology industry in Taiwan.

    The Nikkei index shows that the revenue of Taiwan, China‘s leading technology companies fell by the largest margin in at least a decade last month, which indicates that the demand for chips and other electronic products is about to decline, which may have a profound impact on the world.

    The total sales of 19 Taiwan, China based technology manufacturers that supply top manufacturers such as Apple and Microsoft in March were NT $1.07 trillion (US $35.3 billion), down 18.5% year on year, the largest decline since 2013. Apple‘s main assembler, Foxconn Hon Hai Precision, saw its revenue decline by 21%. TSMC, the world‘s largest wafer foundry, saw its revenue decline by 15.4%, the first decline in nearly four years.

    Out of 19 companies, 16 had their monthly revenue decline, the largest decline in 10 years since the Nikkei began tracking the revenue of technology manufacturers on the Asia 300 list.

    As an ODM, Taiwan, China based company is almost responsible for all production of Apple‘s iPhone, Mac and iPad. Overall, these companies produce over 80% of PCs, 90% of servers, over 60% of semiconductors, and 80% of video game devices worldwide. Therefore, their monthly sales data is a three month leading indicator of demand for these products, reflecting the lag time between the shipment and listing of finished products.

    The decline in income highlights how the demand for digital products has weakened since the peak of the epidemic. The popularity of remote work and online education has driven the purchase of personal computers and other digital devices, and the strong demand for semiconductors has led to a long-term shortage.

    Guangda Computer, the world‘s third-largest personal computer contract manufacturer, has been particularly hit hard as the demand for personal computers has rapidly decreased due to the prosperity caused by the epidemic. Its revenue decreased by 15.9% in March.

    According to a report released this week by American market research firm IDC, global PC shipments totaled 56.9 million units in the first quarter of this year, a year-on-year decrease of 29%. The shipment volume of Apple computers has decreased by 40.5%. The global industry leader Lenovo Group‘s PC shipments have decreased by 30.3%. HP‘s shipment volume has decreased by 24.2%, while Dell has decreased by 31%.

    The weak demand for personal computers has also hurt LCD display manufacturers and chip manufacturers. The revenue of Youda Optoelectronics, a LCD manufacturer in Taiwan, China, fell by 31.6%, while that of its peer Qunchuang Optoelectronics fell by 26.8%.

    The semiconductor industry is facing a headwind. DRAM memory leader South Asia Technology experienced a 68.1% drop in revenue in March.

    Even TSMC cannot go against the trend. According to the latest report from TSMC, its revenue in March 2023 decreased by more than 10% month on month and year-on-year. TSMC announced that its revenue for March 2023 was approximately NT $145.41 billion (US $4.77 billion), a decrease of 10.9% month on month and 15.4% year-on-year. The total revenue of pure wafer foundry in the first quarter was NT $508.63 billion, an increase of 3.6% compared to the same period in 2022.

    According to the forecast of Taiwan, China Fubang Investment Service Co., Ltd., the contract manufacturer expects that its revenue in the first quarter will increase by 3.6% year on year, and its net profit will decline by 10.6%. Fubon expects TSMC‘s revenue and profit figures to decline in both the second and third quarters. Fubon stated that its annual revenue will decline by 5.2% and its net profit will decrease by 23.4%. This will be the first annual net profit decline for TSMC in four years, in stark contrast to the 70% jump in 2022.

    According to a manufacturer source related to TSMC, TSMC‘s factories were operating at full capacity last year, but now "due to weak demand, especially in the PC industry, some production lines have an operating rate of about 50%".

    UMC‘s sales data for March also fell short of expectations. Market observers predict that Liandian‘s revenue will resume growth in the second half of this year, despite many IC industries undergoing inventory adjustments. According to observers, the factory may experience a slight decrease or flat growth in the second quarter compared to the previous quarter.

    Liandian previously stated that wafer shipments in the first quarter will decrease by 17-19% month on month, and the overall wafer utilization rate of the Times Factory will decrease from 90% in the previous quarter to around 70%. At the same time, the foundry expects the average selling price of its wafers to remain unchanged this quarter.

    South Asia Technology President Li Peiying stated that DRAM prices fell by 7% to 9% in the first quarter, but prices will continue to decline in the second quarter as inventory still needs to be cleared. IDC Research Manager Jitesh Ubrani stated that the channel inventory of personal computers is "still much higher than the healthy four to six week range". Even with significant discounts, channels and PC manufacturers can expect high inventory to continue into the middle of this year and possibly into the third quarter

    In addition to being affected by the global economy, Taiwan, China‘s OEM factories are still facing the challenge of Samsung Electronics. According to recent reports, Samsung has launched a wafer foundry price war to grab orders, locking in mature manufacturing processes, with a price reduction of up to 10%. Liandian and World Advanced have also begun to have conditions to lower prices for customers. As the price reduction and order grabbing battle begins, it is feared that the expected stable average unit price (ASP) may be broken. Samsung wafer foundry has previously offered slightly lower prices than its peers, but overall market demand is still sluggish. Samsung will reduce its quotation by 10%, which is bound to become the basis for IC design factories to negotiate prices with other wafer foundry factories. "If you don‘t lower the price, I will switch to Samsung production," which puts pressure on the wafer foundry industry.

     Some manufacturers in Taiwan, China believe that the industry will not fully recover until next year or later, depending on the economic conditions of the United States and China.