Samsung, the world's No. 2 chipmaker after Intel Corp and the largest LCD producer, said sales slid 4.2 per cent, the first year-on-year drop in seven quarters. Samsung joins International Business Machine Corp and Sun Microsystems Inc in reporting profit that missed analysts' estimates, prompting Asian technology stocks to decline on concern recovery in demand will be delayed. Royal Philips Electronics NV, which competes with Samsung in LCDs, may report on April 18 that profit fell 73 per cent in the quarter. "This just inflated worries that the recovery in the information technology industry will be delayed by a quarter or two," said Yang Jun Won, who oversees the equivalent of US$390 million at Macquarie-IMM Investment Management Co in Seoul. He said he recently sold Samsung shares.

Net income, which had its biggest year-on-year drop in more than three years, was 30 per cent less than the median estimate of analysts after the company booked a 700 billion won loss in the quarter from its Samsung Card Co unit. Sales fell short of the 14.25 trillion won projected by the median forecast. "I'm very disappointed," said Yoo Ji Yeong, who helps oversee the equivalent of US$980 million at CJ Investment Trust Management Co in Seoul.

Samsung, the South Korean multinational company, has already invested US$1.4 billion in Malaysia, with plants producing TV monitors (cathode ray tube) in Seremban and microwave ovens in Port Klang. "We have moved our microwave oven manufacturing to Malaysia from South Korea. If everything goes as planned, we may relocate our plasma TV production to our Negri Sembilan facility by June," Lee said. "In fact, I am back in South Korea to discuss about the plasma TV investment with the top management," he added.

The Government plans to develop a full-fledged electronics cluster in line with Malaysia's continuous focus on sustaining the high growth of the electronics industry. Minister of International Trade and Industry Datuk Seri Rafidah Aziz said this cluster will be built around the semiconductor sector with core activities in wafer fabrication, integrated circuit design and manufacture of high value-added products.

"These include photonics devices, digital audio/visual products, telecommunications equipment, computer and multimedia hardware, among others," Rafidah said at the opening of the National Seminar on Opportunities in the Electronics Industry in conjunction with new Nepcon Malaysia 2005. Rafidah said electronics industry is currently experiencing a slow recovery from the global downturn. "Nevertheless, export of electronics products from Malaysia increased by 12.8 per cent from RM199.5 billion in 2003 to RM225 billion in 2004 while total electronic imports increased by 13.1 per cent to RM168.2 billion in 2004," said Rafidah. A total of 27 electronic projects were approved by the Government for the first quarter of 2005, with capital investments amounting to RM321 million. Last year, 144 electronic projects were approved which made up to RM7.9 billion in capital investments. The Semiconductor Industry Association has projected the global semiconductor sales to grow by 6.3 per cent in 2006 and by 14.2 per cent to US$259 billion in 2007. Meanwhile, the Malaysian American Electronics Industry group has also forecast that total sales and exports of its 19-member companies will increase by 5 to 10 per cent in 2005.

Rafidah said the main contributors to the growth are the upsurge in new mobile technologies, wireless communications and higher corporate spending on information technology. She said the recent roll out of the third-generation (3G) will create a greater impact in the industry through technology upgrading and research and development enhancement. The global broadband wireless market has increased from US$430 million in 2003 to US$562 million in 2004 and is projected to exceed US$2 billion by end of 2009. She also said that the Micro-Electro-Mechanical System (MEMS) technology is expected to revolutionise every product category. "Industries will be able to produce devices in much smaller dimensions while being enhanced with smart features. "The MEMS global market for 2004 was estimated at US$120 million and is expected to exceed US$1 billion in 2007," she added.

The 10^th Nepcon Malaysia 2005, organised by Reed Exhibition Sdn Bhd, is expected to attract some 8,000 trade visitors from this region. The four-day exhibition will end this Friday. A total of 323 exhibiting companies from 22 countries – including Belgium, China, Canada, Denmark, Hong Kong, Spain and others – will be participating in this year's Nepcon. President of Reed Exhibition Asia Pacific Paul Beh said the international interest and support this year is particularly strong with two official groups from China and South Korea. "China's participation is endorsed by the China Electronics Import and Export Corp (CEIEC), while South Korea's participation is supported by Korea Air Cleaning Association (Kaca)," said Beh. The exhibition is endorsed by Malaysian Industrial Development Authority (Mida), Matrade, Sirim Bhd, CEIEC, Kaca and others. Held alongside the exhibition is the national seminar organised by Mida. The two-day seminar which started May 24, 2005 is designed to update Malaysian manufacturers on the challenges, issues, latest technology and business opportunities in the industry.

This is because March numbers were traditionally stronger than the post-September period in the last four years as new orders compensated for the slack in previous months. Even the ISM Manufacturing Activity Index for last month did not reflect brighter sentiment going forward, with its factory index falling to 53.3 points from 55.2 a month ago. Because of these factors, the research house in maintaining its "neutral" call on the semiconductor sector, with "accumulate" on price weakening call on MPI and Unisem. It is recommending a "buy" call on Globetronics. Mayban Securities, however, is recommending a "hold" on AKN Tech, Globetronics, MPI and Unisem. In its April 2005 research report, Mayban Securities said despite healthy gains early last year, the chip market began to show weakness in the fourth quarter of 2004, with a marked deceleration in sales.

A marked decrease in the production of electronics equipment, which started in the second half of 2004, led quickly to a semiconductor oversupply, applying brakes to substantial semiconductors manufacturing capacity installations put into place earlier this year. The securities firm also referred to market researcher Supply which said the semiconductor supply chain still has US$1 billion in excess chip inventories left. The inventory built up in 2004 is prevalent across all products and regions. Such widespread oversupply remains a concern for the worldwide semiconductor industry.

Intel, the world's largest maker of semiconductors, said last month that demand for its Centrino notebook computer chips boosted utilisation at factories to full capacity. It's a slightly rosier picture," Norwood said. Global sales of computer memory chips will shrink 0.6 per cent this year to US$26.2 billion and decline 4.8 per cent next year to US$24.9 billion, Norwood said in an interview. Gartner had earlier forecast sales would grow 2.8 per cent to US$27.1 billion this year and a decline 31.5 per cent next year to US$18.5 billion, he said. Global sales of NAND flash memory, which go into consumer electronics such as digital cameras, will rise a faster-than-expected 35 per cent this year and 23 per cent next year, he said. Gartner is holding a road show for clients in Asia this week.

Local semiconductor industry can expect a strong second half in 2005, in view of the latest favourable forecast from semiconductor trade and consumer electronics association as well as research houses in the United States. The Semiconductor Industry Association (SIA), for example, has forecast that worldwide sales of computer chips would grow by 6 per cent over 2004, due to stronger sales of personal sales of personal computers, laptops and mobile phones. SIA has also projected sales of digital signal processors to grow at an annual compounded rate of 13.1 per cent by 2008. The Consumer Electronics Association has envisaged spending on consumer electronics to grow 11 per cent this year. Research firm Gartner Inc has projected mobile phone sales to grow 13 per cent over last year after record shipments of 180.6 million units in the first quarter.

Some semiconductor players in Penang's Bayan Lepas Industrial Park (popularly referred to as the Silicon Valley of the East), are positioning to tap new opportunities in anticipation of a rising demand for semiconductor products. AKN Capital Sdn Bhd director B. L. Ooi told StarBiz the reports confirmed what the group had observed several months ago. "We have noted a rising demand for computing, mobile, wireless and disk storage products and that this trend would continue till the end of the year. For AKN Technology Bhd, a company in which AKN Capital holds a 20 per cent stake, we are increasing the capacity of subsidiary PSC Technology (M) Sdn Bhd to do re-engineering work for the disk drive industry," Ooi said. He added that PSC's customers included KOMAG, a thin-film media disk producer, and Western Digital, a hard-disk drive manufacturer. He said about RM15mil is being invested into AKN Technology's lead-frame manufacturing subsidiary, AKN Industries Sdn Bhd, to start a cutting-edge etching facility to produce high-quality lead-frames that are used in semiconductor products. Ooi said MEMS Technology Bhd, in which AKN Capital Sdn Bhd has a 38 per cent stake, was increasing its capacity to produce silicon microphones for the rising demand for mobile phones. "We have started shipping out silicon microphones to our customers overseas. The feedback shows that out of the US$2bil spending for mobile microphones in 2005, 5 per cent will be for silicon microphones. "The spending for mobile microphones is expected to reach US$3bil in 2008, and 15 per cent of this spending will be for silicon microphones," he said.

Eng Teknologi Bhd group executive chairman and chief executive officer Datuk Alfred Teh said that in anticipation of the rising demand for computers, the group had allocated RM15mil for the manufacturing of a new range of base plates for the hard-disk drive industry. Teh said the group had recently secured large orders for its base plates and actuators. "We are now carrying out research and development to develop the prototypes, so that we can commence commercial production in the fourth quarter. This additional investment in base plates business should raise the group's output to three million units per month from the current two million. We are also expecting the global demand for hard-disk drive to grow between 12 per cent and 15 per cent this year," Teh said. He added that the group had recently tapped into the market for mobile hard-disk drive. "We expect our mobile hard-disk drive products to comprise about 20 per cent of the total disk drive output for 2005. The mobile hard-disk drives are manufactured at our plants in Johor and the Philippines," he said.

Globetronics Technology Bhd executive chairman Michael Ng said the favourable forecast was unsurprising as new computer and telecommunication products were being introduced for the coming "back to school" and year-end festive seasons. We are working on six to seven new potential projects, which would generate revenue only in the next financial year. In terms of business strategies, other than to continuously enhance and deepen our product portfolios with our customers, we are on constant lookout to further diversify our revenue base to include new customers operating in the semiconductor assembly and manufacturing arena," Ng said. However, LKT Industrial Bhd executive chairman Vincent Loh said the projected 6 per cent increase in worldwide sales of computer chips was slight and would not have an impact on back-end semiconductor equipment manufacturers like his company. "Normally, chip makers would not invest in back-end semiconductor equipment such as test-equipment handlers and material handlers until they are certain that the industry is experiencing a boom cycle. "We have to wait for another six months before we can tell whether the back-end semiconductor equipment sector would reap any benefit from the growth," he said.