Business

Tuesday May 26, 2009

Mixed views on when tech sector will pick up

By DAVID TAN


GEORGE TOWN: Penang-based manufacturers of hard disk drive (HDD) products, integrated circuits (ICs) and automated equipment are still uncertain and differ in their views about the future of the technology sector for the remainder of 2009.

Datuk Y.K. Teh ... We expect demand to pick up in the third and fourth quarters

The HDD products sector sees sales for the second quarter remaining flat and expects the third and fourth quarters to pick up, while the ICs sector feels the sales volume for the second quarter will remain healthy, but does not see any visibility for the third and final quarter.

The automated equipment manufacturers see some pick-up in the second quarter, but are uncertain towards the third and fourth quarters.

Eng Teknologi Holdings Bhd chief executive officer Datuk Y.K. Teh said some orders were coming in now and the situation had stabilised compared with the first quarter, but estimated that the sales for the current quarter would be flat.

“This is because some of the major hard disk drive players tend to be very cautious about increasing their inventory just before their financial year ends at the end of June.

“Although we expect demand to pick up in the third and fourth quarters, the demand trend would not return to the level before the onset of the economic crisis in late-2007 until the end of 2010 or 2011,” he told StarBiz.

Eng Teknologi is a manufacturer of HDD-based plates and other HDD components, supplying to the five major manufacturers of HDDs worldwide.

Beh Lai Lien ... The group does not expect much improvement until the end of the year

The group has manufacturing facilities in Malaysia, Thailand, China and the Philippines.

Teh said the plant in Dongguan, China, manufacturing mainly actuators, should contribute about 25% to the group’s revenue.

The group’s capital expenditure would be minimal, not exceeding RM15mil for 2009, Teh said, adding: “Our production capacity is presently 70% to 80% utilised, and it can be increased easily by instituting overtime should the need arise.”

On the group’s inventory, Teh said it ballooned in November last year, but was now significantly lower due to prudent inventory management.

He said the data storage industry was expected to improve, as flash memory drives still could not provide affordable large storage capacity.

Globetronics Technology Bhd chief financial officer Ng Kok Choon said business for the group had picked up since end-March.

Chu Jenn Weng ... The semiconductor industry will rebound very strongly after the recession

Globetronics makes ICs for the local semiconductor industry as well as exports.

“The volume of orders for the group should remain healthy in the second quarter, but beyond this period, there is very limited visibility in terms of forecast from the customers.

“For the industry and for most of our end customers, business has been tough and the first quarter could be the worst ever experienced by the industry,” he said.

On its operation in China, Ng said that due to issues of economies of scale, the group had temporarily ceased operations in Jiaxing since March.

“Overall, the China operations will be loss-making in the current financial year of the group, which ends on Dec 31,” he added.

Ng said the group was allocating about RM20mil as capital expenditure this year.

There would typically be no new addition of raw materials and inventory, unless there was confirmed orders from customers, he said, adding: “This is the build to order approach, which adequately addressed the issue of high inventory.”

Automated visual inspection equipment manufacturer Vitrox Technologies Corp Bhd managing director Chu Jenn Weng said although the group’s April sales improved compared with March, it had yet to reach the level of last year’s corresponding period.

The integrated circuit sector does not see any visibility for the third and fourth quarters

“The second quarter is expected to be much better than the first quarter, but there is little visibility for the third quarter,” he said

Chu said the group had already secured from Agilent Technologies Malaysia software support business for automated optical inspection and automated X-ray inspection equipment, which would allow the group to expand vertically.

“We are confident that the semiconductor industry will rebound very strongly after the recession. Having said that, we will also look for opportunities to diversify our businesses to fields such as electronics and medical imaging,” he said, adding that the company had invested significantly to increase its workforce by 20%.

ATS Systemisation Bhd managing director Beh Lai Lien said the group did not expect much improvement until the end of the year.

The company manufactures automated equipment for the semiconductor sector.

“Our business is still affected. The group’s sales have dropped about 30% since late last year. We are allocating negligible capital expenditure, as we have excess capacity,” he said.

“More important for us at the moment is proper planning to ensure good cashflow management for the next 12 to 18 months,” he added.

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