The local semiconductor industry is expected to face challenges to its earnings in 2025 after profit growth likely hits a peak in 2022, according to China Credit Information Service, Ltd. (CCIS).
In a research report to analyze financial conditions in both industrial and service sectors in Taiwan, CCIS, one of the leading credit information agencies in the country, said that judging from the development of Taiwan’s semiconductor industry, which makes up the backbone of the country’s exports, integrated circuit firms as a whole could see profit growth gradually moderating after hitting a peak in 2022.
In 2025, the impact on the industry’s bottom line will become more obvious as the United States, Europe, South Korea, and Japan, which are all competitors of Taiwan in semiconductors, will have fulfilled their expansion plans to try to gain higher shares of the global IC market, according to CCIS.
In addition, CCIS said, China is expected to reduce its dependence on Taiwan’s semiconductor exports which would further affect Taiwanese exporters’ earnings.
CCIS added that as Taiwanese semiconductor firms would see investment costs growing due to their overseas expansion, the industry was expected to see falling profit growth.
Among the prominent overseas investments by Taiwanese semiconductor firms, Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s largest contract chipmaker, is investing US$12 billion to build a wafer fab in the U.S. state of Arizona with commercial production of chips using the company’s advanced 5-nanometer process scheduled to begin in 2024.
In addition, a TSMC joint-venture wafer fab is under construction in Japan with mass production also scheduled to start in 2024 of specialty chips using the company’s mature 22nm and 28nm technologies.
The CCIS report showed that the local manufacturing sector as a whole posted the highest-ever profit margins in 10 years in 2021, and the uptrend is expected to continue in 2022 despite a slew of uncertainties.
The uncertainties included skyrocketing inflation worldwide, a rate hike cycle launched by the U.S. Federal Reserve, the war waged by Russia against Ukraine, and an economic slowdown in China, the report indicated.
The credit information firm said that in addition to the local semiconductor industry, old economy industries including textile firms, electric equipment suppliers, and machinery makers performed better in the first half of this year, compared with the same period last year.
In the second half of the year, Taiwan’s tech sector is expected to benefit from the launch of the iPhone 14, expected in early September, and a booming global electronics vehicle market, CCIS said.
According to CCIS, the local manufacturing sector’s gross margin — the difference between revenue and cost of goods sold — rose to 12.4 percent in 2021 from 10.2 percent in 2020, while its operating margin — the difference between sales, the cost of goods sold, and operating expenses — moved higher to 7.8 percent from 5.1 percent.
Meanwhile, the sector’s net margin — the difference between gross profit and total expenses, including interest payments and taxes — also rose to 11.3 percent in 2021 from 8.0 percent in 2020, CCIS’s report indicated.
In 2021, the optoelectronics/precision equipment industry had the highest industrial gross margin of 30.9 percent, marking the fourth consecutive year it has finished on top, but the figure was its lowest in five years due to sanctions imposed by Washington on Chinese telecom equipment supplier Huawei Technologies Co., CCIS said.
The rubber/plastics, non-metal mineral, agriculture and food, and machinery industries took the 2nd-5th places in terms of gross margin, which was 26.4 percent, 20.57 percent, 20.24 percent, and 19.8 percent, respectively, in 2021, CCIS added.
Source: Focus Taiwan News Channel