Penang firms: Effect of Apple’s order-cut likely to be temporary

Group chief executive officer Datuk Heng Huck Lee(inset) said the group was confident of achieving its target with a strong double-digit percentage growth for its gross profit.

GEORGE TOWN: Penang-based test equipment and sensor manufacturers expect their customers to exercise caution on outlook and spending this year following Apple Inc lowering its first-quarter guidance.

Globetronics Technology Bhd chief executive officer (CEO) Datuk Heng Huck Lee told StarBiz that the group’s sensor customers are expected to adjust near-term forecasts on orders, which would have an impact on the current projection for the first-half of 2019.

“There is no indication that the three sensor projects, to be developed in the second half for display enhancements and gesture functions of new smartphones, would be impacted.

“Smartphone manufacturers would still continue to release new products to sustain and grow their market and performance.

“For us, we are still planning a sizeable budget and capital expenditure to develop and produce environmental-cum-bio sensors, and diversify the development and expansion into medical instruments and 5G telecommunications integrated circuits to reduce the dependency on sensors,” said Heng.

Elsoft Research Bhd CEO C.E. Tan said it would be natural for its customers to exercise caution on their spending for test equipment used for checking smartphones and smart devices.

“For us, we will still carry on with the business plan and budget we have planned for this year, as we also have our orders from the automotive sector to fulfil.

“The technology for smartphones keeps on evolving and that would stimulate the demand for test equipment to check new lighting features and modules.

“For this reason, we believe the impact of the lower guidance would be confined to the first half,” he said.

Elsoft makes test equipment to check the lighting features of smartphones and automobiles.

MMS Ventures Bhd managing director T.K. Sia said the impact would only be temporary.

“There would be demand for test equipment to check new products that are scheduled for release in the third quarter of 2019.

“We just have to be ready to make new test equipment when the orders come in.”

Pentamaster Corp Bhd chairman C.B. Chuah said the group’s customer base was broad enough to cushion any impact in the slowdown of orders from the smartphone segment.

“Besides the smartphone sector, we also supply test equipment for the automotive and medical industries,” he added.

“While we anticipated some challenges in key emerging markets, we did not foresee the magnitude of the economic deceleration, particularly in Greater China,” Apple CEO Tim Cook said in the letter to investors as reported by Reuters.

Cook reportedly told CNBC that Apple products have not been targeted by the Chinese government, although some consumers may have chosen not to buy the iPhones and other Apple devices as the company is an American brand.

“The much larger issue is the slowing of the (Chinese) economy, and then the trade tension that has further pressured it,” Cook pointed out.

The letter also mentioned that Malaysia, among other emerging markets including Mexico, Poland and Vietnam, had set a record for Apple.