Semiconductor firms bracing for the worst


GEORGE TOWN: Semiconductor and electronic firms in Penang are bracing themselves for the worst towards the latter part of this year when the economic slowdown and stock market selloff are expected to bite hard during a traditionally strong period.

Pentamaster Corp Bhd executive chairman CB Chuah said orders from the company's customers for the fourth quarter were not coming in.

“Usually orders from China, the US, and Europe would come in around this time for the fourth quarter. But, because of the global economic crisis, they are not,” he told StarBiz.

Chuah expects developed countries to cut consumer spending and that would in turn affect demand for consumer electronic goods.

“Usually China would continue purchasing with the West slowing down but now even China is tightening,” he said.

“Because the group performed satisfactorily in the first half, our business for the year should not be so badly impacted.”

Chuah said the group's business was cushioned against the impact by demand for its glove-recycling machines that are used in the medical sector.

“During challenging times, there will be more demand for glove-recycling machines to save cost,” he said.

Pentamaster is involved in the manufacture of semiconductor automated equipment for markets in China, the US and Europe, which is a key contributor of the group's revenue.

Mini-Circuits Technologies (Malaysia) Sdn Bhd chairman and president Datuk Seri Kelvin Kiew said there was slowdown in the electronics, semiconductor and radio frequency component sectors.

“China is still buying radio frequency components from us, but the margin is very low. The sale of radio frequency components to mobile telecommunication devices, however, has slowed down,” he said. “The situation is likely to worsen by year-end.”

Mini-Circuits specialises in manufacturing radio frequency components for wireless network infrastructure and mobile telecommunication devices.

Globetronics Technology Bhd chief executive officer Heng Huck Lee expects its customers to exercise caution on orders for the remainder of the year.

“So far there is no cancellation of orders. Our diversification into manufacturing of integrated circuits used in hard disk drives and timing devices has helped to cushion the impact of the slowdown on the group's business,” Heng added.

Globetronics' core business is manufacturing integrated circuits and light-emitting diodes chips.

PIE Industrial Bhd managing director Alvin Mui said should the crisis in the US and Europe prolong, there would be an impact on its business in the fourth quarter as the US market generated about 50% of PIE's revenue.

“But, regardless of the situation in the US and Europe, there will still be industrial activities that would require our industrial electronic products,” he said.

“Thus we need to work harder to find new customers and broaden our revenue base to cushion the impact.”

PIE is a specialist manufacturer of industrial sensor controls, bar code scanners and printed circuit assembled products.

Apart from slower demand, some manufacturers are faced with a double whammy from rising costs.

Cepco Trading director Jansen Lim said the price of engineering plastic resin had soared by about 8% to US$2,480 per tonne currently.

“The higher cost of raw materials will further slow down orders, especially in light of an economic crisis,” he said. “For our side, we should be able to achieve output target of 270 tonnes for this year due to the better sales in the first half of the year.”

The Seberang Prai-based company is a trader and manufacturer of engineering plastic products used in consumer electronic products.

Meanwhile, Malaysian American Electronics Industry chairman Datuk Wong Siew Hai said US multinational corporations still did not know what to expect.

“Due to the uncertainties, they are tightening control over their expenses,” he added.

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