Back to index page

Cycle about to start heading upward

Thailand's electronics sector has weakened this year in line with the business cycle and the global economy.

However, most electronics makers and investors say the cycle is normal and a solid rebound is likely next year. The Electronics and Computer Employers' Association has forecast 30% growth in the second half of 2002, compared with the same period this year.

Among the seven firms on the Shareholder Scorecard, Delta Electronics led with a one-year return of 0.60%, followed by Draco PCB at -25.9%. KR Precision trailed the field at -62.7%.

Before Sept 11, the electronics industry worldwide was projected to record improved sales in the fourth quarter, after a 40% decline, year-on-year, in global turnover earlier in 2001, and a 20% downturn in Thailand.

Almost all electronics companies in Thailand have recorded heavy losses this year, with production capacity halved and workers laid off to keep the businesses viable.

Looking beyond the one-year performance, Delta Electronics, the country's biggest manufacturer of electronic products, stands out with an A-grade and five-year return of 33.8%.

Delta's third-quarter profits were down by two-thirds from a year ago, but over nine months its net profit was three billion baht, up from 2.9 billion in the same period last year.

"The key factors guarding against the industry downturn were our flexible strategies in management, marketing and value-added products," said Kulwadee Kawayawong, in charge of investor relations at Delta.

Profit margins this were up to 20% from 15% last year, helped by highly profitable sales of switching devices, Ms Kulwadee said, adding that earnings were high in an environment where competitors recorded losses.

Delta expects its sales to increase by 5% next year, based on a lift in demand for high-end technical products.

The second-largest producer, Hana Microelectronics had the second-lowest one-year return at -51%. It posted a loss of 38.5 million baht in the third quarter compared with 516.4 million baht in the same period last year. Nine-month net profits fell 63% to 523.1 million baht, though sales revenue was up 4% to 5.27 billion baht.

Chief executive Richard Han acknowledged the plunge in demand for Hana's products, but said new business opportunities were in the pipeline, particularly wireless technology, to offset losses from integrated circuits and micro-electronics.

Hana's return to shareholders over five years was the third best at 10.6%.

Industry analysts say global demand will be strong when the economy recovers _ and Delta and Hana have the advantage of being debt-free.

"Although the business will inevitably suffer a psychological impact from global tension and a downswing in the cycle, Thailand's electronics industry has grown by an average of 15% a year over three decades," an analyst said.

Yuthana Hemungkorn, chairman of the Electronics and Computer Employers' Association, said that from his 30 years' experience, the period between cyclical downturns and upturns averaged three to four years. "There is a growing consensus that the outlook for the industry will be V-shaped next year."

- Srisamorn Phoosuphanusorn