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Frepenca sees flat outlook for semiconductor, electronics [14-01-2013]  
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ore than 90% of The Free Industrial Zone, Penang, Companies' Association's (Frepenca) members are expecting the first quarter 2013 outlook to be flat and even lower compared with the fourth quarter of 2012.

The Frepenca companies, comprising 62 local firms and multinational corporations from the United States and Europe, are involved in the semiconductor and electronic industries.

Frepanca president Heng Huck Lee told StarBiz that some 57% of 62 Frepanca members surveyed reported that their first-quarter outlook this year would be flat against the final quarter of last year.

For the same period, he about 36% of the companies expected lower revenue, adding that only 7% anticipated improvement over the immediate preceding quarter.

In addition, Heng said the majority of the Frepenca members were expected to launch new products in the first quarter.

”Some 71% of our members have drawn up plans for new product launch in the fourth quarter.

”We should be seeing new product launches in the first quarter of 2013. These should generate returns for them in the second quarter 2013 with the majority investing in fresh techonology,” he said.

On engaging new workers, he said most of the Frepanca companies would not be hiring in the first quarter.

“Only 14% of the companies have plans to recruit new workers,” he added.

Heng pointed out that the results of the survey on the companies' “expected” first-quarter performance was consistent with the recent book-to-bill report by SEMI, the global industry association serving the nano and micro-electronic manufacturing supply chains, comprising 2,000 member companies.

“The latest book-to-bill report released last December showed a book-to-bill ratio of 0.79, which is not healthy,” he said.

According to SEMI, North America-based manufacturers of semiconductor equipment posted US$720.4mil in orders worldwide in last November (three-month average basis) and a book-to-bill ratio of 0.79,

A book-to-bill ratio of above one indicates more orders are received than filled, showing a strong market where demand outpaces supply. A book-to-bill ratio of below one indicates weaker demand.

“The first quarter will be a traditionally weak quarter, which usually follows after the Christmas sales period.

“Margins for our members will also be compressed, as the minimum wage law has been implemented starting Jan 1, 2013.

“It will pick up in second quarter as the sales of new products of our members are expected to start making contributions” he said.

Meanwhile, the industrial electronic sector is expected to perform better this first quarter, as it supports a broader range of industries, which includes the military, automotive, and medical.

P.I.E. Industrial Bhd group managing director Alvin Mui said the industrial product sector was much stable and less volatile than the semiconductor industry, as the former served a wider category of industries, which included the military, medical, and automotive sectors.

“The semiconductor segment is very much dependent on the consumer electronic market, comprising products such as computers, tablets, and smartphones.

“The semiconductor market is down now because of the computer segment,” he said.

Mui said that P.I.E. had recently secured medical, military, and automotive contracts from the United States and Europe, which would boost the group's performance this first quarter.

”Last year the group's industrial electronic product business catering to the general and telecommunication industries was badly affected by the global economic crisis.

“We were hit for nine months in 2012, which will impact on our overall performance for the year, driving the revenue down by double digit compared with 2011.

“In mid-2012, we reinvested and widened our industrial product range to serve the military, medical, and automotive sectors, which saw orders for the new products improve in the fourth quarter 2012.

“We expect these new products, comprising customised printed circuit board assembly products and electronic control systems, to boost our business in the first quarter, enabling us to perform better against the previous corresponding period,” he said.

According to the International Data Corp's Semiconductor Applications Forecaster, the semiconductor revenue worldwide will see nominal growth this year at less than 1% reaching US$304bil.

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