Taiwan's CDIB Sees Profits of IC Makers Tumbling in 2001
January 2, 2000 (TAIPEI) -- China Development Industrial Bank (CDIB) issued a warning about the climate of Taiwan's industries in 2001.
CDIB predicted that Taiwan's semiconductor and TFT-LCD industries would witness falling profit margins, as those markets are seeing a waning of demand and as their Japanese and Korean rivals are slashing product prices to undercut them.
Also, CDIB said that the sectors of notebook computers, online games and telecom dense wave division multiplexing (D-WDM) would speed up their investments in China in the near future. The large companies will win footholds in China, deterring the developments of second-tier makers.
CDIB presented its first forecast for Taiwan's industrial outlook on Dec. 22, which included viewpoints on the prospects of rising industries as well as older industries such as those of cable TV, RAID, private power generation and biotechnology. The contents, according to a local newspaper, are more detailed than forecasts by foreign investment agencies.
The bank's report urged sober caution about the near future of the various industries. For instance, the report said that in 2001, the 64Mb DRAM spot price is likely to fall below the cost of US$2. And TFT-LCD screens would probably face a profit margin of less than 15 percent. The report said that KG Telecommunications Co., Ltd. would face an uphill battle to avoid losing competitiveness in the wake of the integration in the telecom market. KG Telecom is predicted to report earnings per share of only NT$0.18 in 2001.
As concern the Chinese securities markets, CDIB said that the 2001 merger of the Shanghai and Shenzhen securities exchange markets would create the second largest securities exchange in Asia with a total market value of US$538.8 billion. The creation of this Chinese stock market, second only to the Tokyo Stock Exchange, would make it easier for Chinese companies to raise funds. However, the key to its success would depend on China's effort to enhance market-transparent information in trading and higher flexibility in investments.
Although the Chinese stock market won't likely fall in the near future, the indices may come off their peaks as the U.S. economy seems set to cool and stage a successful soft-landing and the markets apparently have run out of steam.
CDIB lowered the annual growth of the PC market from the earlier projected 14 percent to 10 percent for 2001. The continuous fall in PC price will likely offset bulk order inflows from the United States and Japan, thereby resulting in a profit margin of less than 10 percent for leading local PC makers in 2001. Notebook computer makers will continue their efforts to diversify operations via inroads into contract manufacturing of mobile phones. Another focus will be the acceleration and expansion of their production lines in China.
Adversely affected by the slowing of the PC market, the output value of DRAMs will amount to US$41 billion in 2001, showing an annual growth of 32 percent. That result would fall far short of the annual growth of 48 percent forecast for 2000. CDIB said the 64Mb DRAM spot prices would reach a very low level.
(Commercial Times, Taiwan)
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