Taiwan's technology industry saw its slowest revenue drop in a decade in March

Taiwan's leading technology companies saw their revenues fall the most in at least a decade in March, according to the Nikkei Asian Review, signaling a looming slump in demand for chips and other electronics that will have far-reaching global consequences.

The 19 Taiwan-based tech manufacturers that supply top manufacturers such as Apple Inc and Microsoft Corp reported combined sales of NT $1.07 trillion (US $35.3 billion) in March, down 18.5 percent from a year earlier and the biggest drop since 2013, the Nikkei average showed.

In addition, Apple's main assembler, Hon Hai Precision Industry, reported a 21% drop in revenue. Revenues atTaiwan Semiconductor Manufacturing, the world's largest foundry, also fell for the first time in nearly four years, down about 15.4 per cent.

Sixteen of the 19 companies reported a drop in revenue for the month, the highest number in the decade since the Nikkei started tracking revenue among tech manufacturers on the Asia300 list.

As contract manufacturers, Taiwanese companies make almost all of Apple's iphones, Macs and ipads. These companies produce more than 80 percent of the world's PCS, 90 percent of its servers, more than 60 percent of its semiconductors and 80 percent of its video game equipment.

According to Nikkei, the revenue decline highlights the waning demand for digital products since the height of the pandemic. The spread of telecommuting and online education has driven purchases of personal computers and other digital devices, and strong demand for semiconductors has led to chronic shortages.

Quanta was hit particularly hard, with revenue falling 15.9 per cent in March as demand for personal computers rapidly waned in the pandemic-induced boom.

Worldwide PC shipments totaled 56.9 million units in the first quarter of this year, down 29 percent from a year earlier, according to data released this week by market research firm IDC. Apple's shipments fell 40.5 percent. Lenovo's PC shipments fell 30.3 percent. HP's shipments fell 24.2 percent and Dell's fell 31 percent.

Weak demand for personal computers has also hurt LCD makers and chip makers. Au and Innolux, also known as the "panel tigers", saw their revenue fall 31.6 percent and 26.8 percent, respectively.

The semiconductor industry is facing headwinds. Nanya Technology, the DRAM leader, saw its revenue plunge 68.1 percent in March.

Even Taiwan Semiconductor can't buck the trend. Taiwan Semiconductor is expected to post 3.6 percent year-on-year revenue growth and a 10.6 percent drop in net profit in the first quarter, according to a forecast by Fubon Securities Investment Services.

Industry view

Fubon expects TSMC's revenue and profit figures to fall in both the second and third quarters. Fubon said full-year revenue would fall 5.2 per cent and net profit would fall 23.4 per cent. That would be TSMC's first drop in full-year net profit in four years and contrasts with a 70 per cent jump in 2022.

TSMC's factories were running at full capacity last year, but now "some production lines are running at about 50 per cent due to weak demand, especially in the PC sector", according to a manufacturer source linked to the company.

Nanya Technology President Lee Pei Ying said DRAM prices fell 7 to 9 percent in the first quarter, but prices will continue to fall in the second quarter as inventories still need to be cleared.

IDC research manager Jitesh Ubrani said channel inventories for PC brains "remain well above the healthy four - to six-week range." "Even with deep discounts, channel and PC makers can expect high inventories to persist through the middle of the year and possibly into the third quarter."

Some manufacturers don't expect a full recovery until next year or later, depending on economic conditions in the U.S. and China.