Rising consumption of PCs in China and increased global semiconductor spending are expected to drive the growth of local automated semiconductor equipment and chip-assembly companies in the second quarter, following a sluggish first quarter.
Vitrox Corp Bhd, Pentamaster Corp Bhd and Globetronics Technology Bhd are some of the companies supporting the semiconductor and electronics industries that expect their sales for the second quarter to improve, and the favourable business trend to continue into the second half.
The PC market in China is expected to grow by about 13% this year, driven by the rise of Ultrabooks, Windows 8 operating system and Ivy Bridge microprocessor, according to the latest IHS iSuppli China Research report released in April.
“China has become the most important PC market worldwide, representing 22% of the global demand and contributing more than 90% of total production.
“As a result of this demand, PC shipments in 2012 will reach 83.6 million units, up from 73.9 million units in 2011 and from 67 million units in 2010,” the report said.
Vitrox managing director Chu Jenn Weng said more Ultrabooks, PCs using Windows 8, and the implementation of 4G servers would translate into greater demand for automated inspection equipment to check for defects in semiconductor and electronic products.
“We are seeing orders for the group's vision-inspection equipment for checking defects of semiconductor chips and advanced optical inspection and X-ray equipment for checking defect on printed circuit assembled boards picking up in the second quarter,” he said.
“The orders are coming from the electronic manufacturing service providers in China and Thailand.
“On top of new PC products, there is also the adjustment in the inventories of the semiconductor and electronic segments that will drive growth, as both industries had been experiencing a slowdown since the second half of 2011.”
Pentamaster executive chairman Chuah Choon Bin said the group's sales in the second quarter were expected to improve over the first quarter, which was one of the worst quarters in recent years.
Its sales for the first quarter are expected to be lower compared with the previous year corresponding period and the fourth quarter of 2011.
The sales of its automated test handlers are mainly to manufacturers of tablets, who are now ramping up the production of different models.
“Our sales of light-emitting diode (LEDs) test handlers for the automotive industry is also picking up. The automotive industry is a key driver for LED lighting these days, more so than LED household lighting, as new vehicles are equipped with LED lighting system,” Chuah said.
“Furthermore, it is still expensive for households to convert from conventional lighting to LED lighting.”
The forecast from customers for the second half was positive, he added.
“We expect the performance of the second quarter to be on par with last year's corresponding quarter, which saw the group achieved RM16.9mil in revenue. The elections in the United States should play a role in boosting the demand for semiconductor and electronic products, as a result of stimulus spending.”
According to the latest report by the Arizona-based research house, IC Insights, the US elections are also expected to drive demand for semiconductor chips.
“The global semiconductor market is set to show 7% growth in 2012 alongside a world economy with 3.4% GDP growth.
“Historically, US presidential elections years have been very good for the semiconductor market as many administrations have attempted to pass mostly short-term legislation to boost the economy and look good in the eyes of voters and stand a better chance of getting re-elected,” it said.
“In the past 10 US election years dating back to 1972, worldwide GDP growth averaged 4% while semiconductor industry growth has averaged 24%. In fact, the semiconductor industry has increased 10% or better in eight of the past 10 US election years.”
Integrated circuits and LED chip manufacturer Globetronics is also expecting a very exciting second quarter, according to chief executive officer Heng Huck Lee.
“The first quarter was bad for the semiconductor industry. As for our first-quarter performance, we are expecting flat sales compared with the same period last year and the fourth quarter of 2011, but with much improved profit compared with the fourth quarter last year.
“Generally, I think we can expect gradual recovery in the coming quarters, as inventory level continues to come down, driven mainly by smartphones and tablets,” he said.
Heng said price erosion and excess capacity would continue to challenge the LED market, which should be tough throughout 2012.
“Globetronics is investing around RM60mil as capital expenditure this year, which is double the spending for 2011, as we have two to three projects in the pipeline.
“With this investment and barring any unforeseen changes in the global economy, we are bullish that our 2012 will be much better than 2011 topline and bottomline,” Heng said.
On the industrial electronic products sector, PIE Industrial Bhd expects the group's growth for the second quarter to improve over the first quarter, which fell compared with the previous corresponding period.
“The orders for the second quarter are coming in. These are orders for our industrial electronic products such as motion and sensor control devices and assembled printed circuit boards for telecommunication and medical devices,” managing director Alvin Mui said.
The performance of the second quarter should be on par with the performance a year ago which saw the group registering RM10.7mil in pre-tax profits on turnover of RM90mil.
Mui said the group was now in the process of obtaining the ISO16949 accreditation that would enable the group to enlarge its product supply.
The group is expected to achieve double-digit growth in sales over 2011, Mui said.