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Taiwan’s top tech companies witnessed the biggest drop in their revenues in almost a decade in March 2023, indicating a potential decline in demand for electronic goods, not only in the country but across the world.
Revenues of 19 Taiwanese manufacturers, who produce and supply goods to Microsoft, Apple, and other big companies, experienced a combined year-on-year decline of 18.5% last month. Of the 19, around 16 companies registered a downturn in revenues, the highest since 2013, as per data from Nikkei Asia.
“Weakening economic growth momentum in the US and EU has impacted on consumer demand for electronics (globally), with the economic slowdown in mainland China during late 2022 also contributing to the downturn in new orders,” said S&P Global in a market analysis..
“Overall, total new export orders for Taiwan’s consumer electronics products fell by 20.9% y/y in December (2022), while orders for information and communications products fell by 21.4% y/y,” the market intelligence firm added.
Taiwan tech sector affected by weak demand for PCs globally
Among major Taiwan tech companies, revenues of Quanta Computer, the world’s third largest contract manufacturer of PCs, declined. Its sales witnessed a 15.9% drop year on year in March 2023 to around NT$92.75 bn (~$3.4 bn). Meanwhile, the total sales of the company fell by more than 11% year on year to NT$ 266.181 bn (~$8.73 bn) in the first three months of 2023.
The drop in sales can be attributed to the fact that worldwide demand for PCs slumped by 29% year on year in the first quarter of 2023. Global shipments of PCs amounted to around 56.9 million during this period, as per data from the International Data Corporation (IDC).
“The preliminary results also represented a coda to the era of Covid-driven demand and at least a temporary return to pre-Covid patterns. Shipment volume in 1Q23 was noticeably lower than the 59.2 million units shipped in 1Q19 and 60.6 million in 1Q18,” the report said.
Currently, weak global demand for PCs has also affected the semiconductor industry as well as liquid crystal display manufacturers in the Taiwan tech sector. Over 60% of the world’s semiconductors, including over 90% of the most sophisticated ones, are produced in Taiwan.
The largest contract chip manufacturer in the world, Taiwan Semiconductor Manufacturing Company (TSMC), reported revenues of NT$145.41 bn ($4.76 bn) in March 2023, down by 15.4% from March 2022.
Prior to this, Berkshire Hathaway, which is led by Warren Buffet, reduced its holdings in TSMC by 86% to 8.3 million, which caused the chipmaker’s stock to decline by 4% on February 15, 2023. Warren Buffet claimed that the company was well-managed but stated in an interview with Nikkei that there were “better places” to invest the company’s resources.
Looking forward, as per projections from Taiwan’s Fubon Investment Services, the revenue of the contract manufacturer is expected to fall by 5.2% this year, while net profit are said to recede by 23.4%. This would be the biggest fall in the company’s net profit in four years.
Furthermore, Nanya Technology, a leader in DRAM memory, announced a net revenue of around NT$2.15 bn (~$0.07bn) in March, a 68.15% decrease year over year. The Taiwan tech company’s revenue for the first quarter of 2023 was NT$6.25 bn (~$0.21 bn), a 67.28% decrease from the Q1 of last year.
Nanya recorded a net loss of NT$1.69 bn (~$0.05 bn) in the first three months of 2023, down from a profit of NT$6.55 bn (~$0.21 bn) during the same period of FY22, accounting for around 125% fall in the company’s net income.
Among others, Taiwanese LCD manufacturer AUO saw a 31.6% decline in revenue in March 2023, while competitor Innolux saw its top line decline by 26.8% during the same period. Along with that, the electronics contract manufacturer and the main assembler for Apple, Hon Hai Precision Industry (known as Foxconn outside China and Taiwan) saw a 21% drop in revenue last month.
“…the government will provide more financial incentives to spur the advanced semiconductor investment and sustain the competitiveness of the tech sector,” opined Ma Tieying, Economist at DBS Bank in an insight published in December 2022.
“In the short term, the (Taiwan) tech sector will enter a cyclical downturn in 2023, due to lower demand, supply glut and pressure of destocking,” the economist added.
