GEORGE TOWN: The worst may be over for local electrical and electronics (E&E) companies supporting the artificial intelligence (AI), medical technology devices, automotive, cloud computing and aerospace sectors.
Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai said manufacturers supporting the sectors are restocking their inventories.
“We can expect demand to pick up again gradually,” he said.
The Semiconductor Industry Association has announced that the global semiconductor industry sales totalled US$46.6bil in October – an increase of 3.9% compared with September’s total of US$44.9bil.
However, it was still 0.7% lower than the October 2022 total of US$46.9bil.
Regionally, month-on-month sales increased in China (6.1%), Asia-Pacific and others (4.9%), the Americas (2.9%), Japan (0.6%) and Europe (0.2%).
“A new World Semiconductor Trade Statistics (WSTS) report has also forecast that annual global sales would increase 13.1% in 2024, after falling 9.4% in 2023,” Wong said.
WSTS projected worldwide semiconductor sales to reach US$520bil in 2023 (down from the 2022 sales total of US$574.1bil) and hit US$588.4bil in 2024.
Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew HaiThe personal computing, smartphones and consumer electronics sectors have been experiencing flat or contracting sales, according to Wong.
“We will know in the first quarter of next year whether consumer electronics will recover in the second half of 2024,” he added.
Malaysia exported RM484bil of E&E products from January to October, 0.8% lower than January to October 2022.
The E&E trade surplus for the first 10 months of this year was RM193bil, compared with the total trade surplus for Malaysia of RM190bil.
“The semiconductor situation in the country is still good as our E&E exports contracted by a mere 0.8% compared with last year,” he added.
Meanwhile, some local E&E manufacturing companies are bearing the brunt of the global economic slowdown arising from macroeconomic and geopolitical issues.
MMS Ventures Bhd
, a manufacturer of semiconductor test equipment for smart devices, expected the challenging operating environment to negatively impact its performance.
“The prolonged global economic slowdown continued to weigh on the outlook of the semiconductor industry.
“Amid all the news on a positive recovery, we expect a challenging operating environment for the rest of the year, which will see our results in the negative,” it said in a filing with Bursa Malaysia.
For the nine months ended Sept 30, 2023, MMS posted a net loss of RM1.99mil on the back of RM10.5mil revenue compared with a net profit of RM8.5mil on the back of an RM46mil revenue in the previous year’s same period.
Elsoft Research Bhd, an automated test equipment (ATE) manufacturer serving the automotive, smart devices, and general lighting industries, said the demand for ATE would remain weak in the short term.
“Despite the short-term challenges, the management is optimistic about the group’s future performance,” Elsoft said in its filing with Bursa Malaysia.
For the nine months ended Sept 30, 2023, Elsoft recorded a net profit of RM7mil on the back of an RM13.8mil revenue compared with RM11.6mil and RM23.2mil achieved in the previous year’s corresponding period.For the nine months ended Sept 30, 2023, vision inspection equipment manufacturer Vitrox Corp Bhd recorded RM103.4mil in net profit on the back of an RM432.6mil revenue, compared with RM151mil and RM560mil achieved in the previous year’s corresponding period.
Vitrox said it was committed to its long-term strategies to strengthen its operations, new product innovation and expand its market. The group expects a robust recovery in the financial year 2024.
Vitrox maintained an optimistic outlook based on the sustained growth in demand from AI, telecommunications and automotive sectors.
Despite weaker reported earnings from the automated test equipment maker, AmInvestment Bank Research remained “positive” on the company given its well-diversified revenue base and exposure to high-growth industries, including computing, telecommunications and automotive segments.
The research house added that Vitrox’s geographical diversity would play an important role in attracting new customers due to trade diversion resulting from the US-China chip war, particularly in Mexico and the Asean region.
As such, AmInvestment expects a gradual recovery and stronger demand in the automated board inspection and machine vision system segments for 1Q24 compared with 2H23.
It has upgraded Vitrox to “buy” from “hold”, maintaining a stable fair value of RM8.40, based on a higher price-to-earnings ratio of 41 times (from 36 times), up one standard deviation above the five-year mean of 32 times on a revised FY24 earnings per share.
Meanwhile, semiconductor test equipment and factory automation manufacturer Pentamaster Corp Bhd is optimistic about concluding the 2023 financial year with another revenue milestone, on the back of an encouraging order book from its automotive and medical device segments.
It saw an uptick in its net profit to RM68.42mil for the nine months ended Sept 30, 2023 from RM59.67mil a year ago while revenue rose to RM522.93mil from RM452.96mil.
However, CGS-CIMB Research kept its “hold” call on Pentamaster, with a lower target price of RM5.24, based on its nine-month results and a recent briefing indicating a slowing growth trend in the automotive sector, due to increasing competition in electric vehicles (EVs).
The research house said Pentamaster’s results for the nine months just ended lagged both its full-year forecast at 63% and the Bloomberg consensus estimate at 58%.
Despite a 47% year-on-year growth in the nine-month automotive revenue, the 30% quarter-on-quarter decline in the third quarter (3Q23) could be a telling sign of moderating EV demand, given the environment of rising interest rates and diminishing subsidy tailwinds.
It said this could be cushioned by the medical segment, which saw a fourfold sequential revenue growth in 3Q23 to RM64mil, an indication of a significant ramp-up in its factory automation solutions works for its main medical customer’s new facility in Penang.
PIE Industrial Bhd remained optimistic in engaging potential new customers from diverse industries in the medical, industrial, consumer and telecommunication sectors.
“Good ongoing discussion is in progress, which could potentially have a very positive contribution to the group’s growth if successfully engaged,” PIE said in a recent announcement.
The company posted a marginal increase in its net profit to RM45.72mil in the nine months ended Sept 30, 2023 from RM42.8mil a year earlier on the back of higher revenue of RM919.76mil from RM823.86mil.
