semiconductor industry

 
 

KESM feels trade war effects, earnings slump

PETALING JAYA: KESM Industries Bhd’s net profit slumped 79.8% to RM2.29 million for the fourth quarter ended July 31, 2019 from RM11.32 million reported for the same period of the previous year, due to lower demand for burn-in, testing and electronic manufacturing services.

Revenue for the period stood at RM70.90 million, a 16.8% decrease from RM85.27 million registered previously.

The group has proposed to declare a final dividend of 6 sen per share for the quarter under review.

KESM’s full-year net profit also plunged 84% to RM6.28 million from RM39.34 million a year ago, on the back of a 12.1% decline in revenue to RM307.38 million from RM349.78 million.

Looking ahead, the group said the market weakness caused by the series of tariff hikes between the US and China have yet to abate.

“Barring further escalation of trade wars and major economies slipping into recession, the group is expecting a progressive recovery in 2020.”

It said the group remains cautious in capital spending, and will further its staff training and development in automation to drive productivity.

KESM also noted that the global semiconductor industry is forecast to decrease 9.6% to US$429 billion (RM1.8 trillion) in 2019 from US$475 billion in 2018.

“This decline is being driven mainly by lower memory pricing, the ongoing impact of the trade disputes between US and China and the forecast of sluggish growth in China.”


MMIS debuts on LEAP Market

KUALA LUMPUR: Precision engineering parts manufacturer MMIS Bhd made its debut on the Leading Entrepreneur Accelerator Platform (LEAP) Market of Bursa Malaysia Securities Bhd this morning with an opening price of 12 sen, a 20% or 2 sen premium over its IPO price of 10 sen.

Its first traded volume was 2 million shares.

MMIS placed out 50 million new shares representing 10% of the company’s enlarged share capital to selected sophisticated investors at 10 sen per share, raising a total of RM5 million. Upon its debut, MMIS will have a market capitalisation of RM50 million.

The company manufactures precision engineering parts and provides services for multinational customers in the semiconductor industry value chain and also cater for a wide range of industries, including but not limited to medical, engineering, electronic packaging, oil and gas, power generation and automotive.

At the listing ceremony, MMIS managing director Loh Chin Soon said the precision engineering industry in Malaysia has shown promising growth prospects.

“With our strong portfolio of customers and assets, we are confident that MMIS will be well-positioned to ride on the industry’s growth in the long-term,” he said in a statement.

He said presently the average utilisation rate of its computer numerical control (CNC) machines is at 73% while its production space is fully utilised.

“In anticipation of increasing orders, we will need more production space. As such, we plan to use part of the proceeds raised from the listing and bank borrowings to enlarge our current facility and increase floor production with our recent acquisition of a 4,252 sqm (1.05 acre) parcel of land beside our existing production facility to increase floor production space from 32,400 sq ft to 66,600 sq ft by end of 2020,” he added.

MMIS’ machinery is able to undertake a wide range of specifications that allow them to expand its offerings to future and existing customers, as well as to penetrate various industries to acquire new customers.

“We intend to leverage on our capabilities, technological know-how and proven track record to further expand our range of offerings to our existing customers, and to acquire new customers via targeted sales and marketing activities. Since we have existing customers in the medical and engineering industries, we believe that we can expand our product and service offerings in these new market segments,” he added.

Loh said the listing will enhance MMIS’s vision of becoming the leading manufacturer and total solutions provider in precision metal fabrication in Malaysia and in the Asean region.


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US-China trade war still clouds M’sian export outlook

PETALING JAYA: Despite Malaysia’s exports registering a 1.1% growth in April, analysts opined that Malaysia’s trade performance will continue to be bogged down by trade tensions.

Affin Hwang Research cautioned that the trade tension between the US and China poses some downside risk to Malaysia’s export growth, especially for the electrical and electronics (E&E) segment. It cited that that last year China’s imports of Malaysian electrical machinery and equipment accounted for 7% of its total electronic imports.

“Besides that, the recent cyclical slowdown in the tech cycle will also weigh on export growth, as reflected in the drop in global semiconductor sales for the third consecutive month in March of 12.9% yoy (-10.6% in February), according to the Semiconductor Industry Association.”

However, the research house said the IHS Markit’s Manufacturing PMI survey highlighted that manufacturers in Malaysia were positive about future output volume as confidence remained at its highest level since October 2013 amid expectations of higher foreign demand, possibly indicating some recovery for Malaysia’s manufactured goods in the months ahead.

For 2019, Affin Hwang expects gross export to expand 2% compared with 6.7% in the previous year while gross import is projected to expand 3.4% this year from 4.9% in 2018.

“As a result, we project Malaysia’s trade surplus at around RM110 billion for 2019, lower than RM120.3 billion in 2018.”

The research house maintain its 2019 GDP growth forecast at 4.5% (4.7% in 2018), which is at the mid-point of the current official government forecast of 4.3-4.8%.

Meanwhile, CGS-CIMB Research expects exports to slip in May as global trade policy uncertainties hurt demand and business sentiment.

It expects manufacturing activity to remain subdued, while deepening trade disputes between the US and China present downside risks to its 2019 GDP growth forecast of 4.7%.”

“While output of surveyed manufacturers remained high, pipeline of new work was depleting, leading firms to remain cautious on hiring and capacity expansion,“ it said.


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Global headwinds seen continuing to weigh on exports

PETALING JAYA: Analysts remain less optimistic on their outlook for Malaysia’s exports this year on the back of uncertainty in global trade and growth slowdown in the key export markets.

In a note last Friday, PublicInvest Research said it is of the view that the recent export numbers moderated amid unresolved trade disputes that pushed traders to be cautious and calculative in their commercial decisions.

“Trade negotiations are ongoing and given the depth and complexity of the matter, this could last for the entire second quarter (Q2), suggesting that trade may not rebound until then.

“We expect a piece-meal solution at the very least which should be enough to give trade the jolt it needs. Traders and exporters may remain cautious and calculative with their commerce-related decisions until then,” it explained.

Nevertheless, the research house said Malaysia is in the best position to gain from a global trade rebound, thanks to the competitive ringgit and ample capacity in the economy.

Meanwhile, BIMB Securities Research opined that 2019 would be a challenging year for Malaysia’s exports primarily weighed by the trade tension between the US and China, prospect of cooling global growth, China’s slowing economy, a weak EU economy and sluggish demand for commodities.

“There is also expected to be a slower global demand for electrical and electronics (E&E) products,” it said.

According to the Semiconductor Industry Association, the global semiconductor sales were up 13.7% in 2018, but it is forecasted to decline 3%.

Overall, BIMB Securities believes that there will be a general slowdown in the global economy that would impact exports this year and it anticipates the exports growth to slow down to 3.4% in 2019.

“Moving forward, based on the latest manufacturing Purchasing Managers’ Index (PMI) reports, we are cautiously sanguine in the near-term as new exports orders are weakening despite expansion in the region’s manufacturing activity.

“We maintain our view that trade performance would remain subdued going forward. After almost reaching the RM1 trillion mark in 2018 (2018 export: RM998 billion) with a year-on-year growth of 6.7%, it will be tough for exports to achieve the same figure this year with the anticipated slower global growth.”

However, UOB Research said the uptick in recent PMI from US, China and the region in March, alongside signs of constructive US-China talks, could help Malaysia’s exports and industrial activity turn the corner in Q2’2019.


Samsung Elec flags earnings miss as chip prices slide

SEOUL: Samsung Electronics Co Ltd said on Tuesday first-quarter profit would likely miss market expectations due to falls in chip prices and slowing demand for display panels, in an unprecedented statement ahead of its earnings guidance.

The announcement came after the Apple Inc supplier and rival told shareholders last week that slack global economic growth and softer demand for memory chips, its core business, would weigh on operations in 2019.

“The company expects the scope of price declines in main memory chip products to be larger than expected,” Samsung said in a regulatory filing pre-empting its earnings guidance due next week.

Samsung did not elaborate on the purpose of its filing. A company official confirmed the global leader in smartphones, televisions and computer chips had not previously provided comment before its official earnings estimate.

The firm was forecast to post a 7.2 trillion won ($6.4 billion) operating profit for the January-March period, according to Refinitiv SmartEstimate, more than 50 percent below the 15.6 trillion won recorded in the same period a year ago.

Its sales were expected to fall to 53.7 trillion won from 60.6 trillion won a year ago, Refinitiv shows.

“Inventories piling up on its memory chip side and the weak performance of its display panels business due to bad sales of Apple’s iPhones are hurting profitability for Samsung,” said Lee Won-sik, an analyst at Shinyoung Securities.

DRAM chip prices fell more than 20 percent on average in the first quarter, according to DRAMeXchange, a unit of Trendforce that traces memory chip prices.

Daiwa Securities forecast Samsung’s display panel division to swing to an operating loss of 620 billion won in the first quarter, while the semiconductor business’s operating profit would shrink.

RECOVERY TIPPED

Uncertainties over U.S.-China trade tensions and China’s sluggish economy are clouding the outlook for global electronics makers, analysts say.

Chipmakers in particular have been hit hard by a glut in the global semiconductor industry triggered by weakening smartphone sales and falling investment from data centre companies.

Samsung told shareholders at its annual general meeting last week that sales of memory products would likely revive in the second half of the year after a tough first half. Investors also took heart when U.S. chipmaker Micron Technology Inc forecast a recovery in the memory chip market around the middle of the year.

Daiwa Securities on Tuesday reaffirmed a buy rating on Samsung, saying it expected demand for memory chips and organic light-emitting diode (OLED) panels to improve from the second half of 2019.

Samsung Electronics shares were down 0.2 percent as of 0237 GMT while the broader market was 0.3 percent higher.

“Samsung is giving a signal to the market so that investors can be prepared and there will be no surprise when Samsung posts its first-quarter earning guidance next week,” said Park Jung-hoon, a fund manager at HDC Asset Management that owns Samsung Elec shares.

“Its shares are not reacting a lot, though, as concerns over its first quarter have been reflected.”