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Top Taiwanese firms forecast dropping demand

Tech earnings this quarter have been a mixed bag.  Apple, Inc. (AAPL), a perennial performer, shockingly fell short of predictions, leading a handful of analysts to downgrade its stock.  On the other hand, Apple's arch-rival Samsung Electronics Comp., Ltd. (SEO:005930) did better than expected lead by world-leading shipments of smartphones.

More earnings reports trickled in on Monday from Taiwan, and the overall message was consistent -- while sales were strong in Q3 2011, demand and price concerns for Q4 2011 have lead to outlook downgrades across the board.

Here's a handful of what arrived...

ASUSTEK Computer, Inc. (TPE:2357)
[Source]

Eee Pad Transformer
[Image Source: Android In]

Business segment:
laptop, netbook, tablet, and smartphone OEM
Revenue:
NT$96.347B ($3.22B USD)
Profit:
NT$4.68B ($157M USD) 
6.4% better than consensus; 9.4% down from Q3 2010, 30% up from Q2 2011
Units Shipped:
4.3 m laptops
1.3 m netbooks
630 k tablets
Q4 Outlook
4.1 m laptops
1.2 m netbooks
600 k tablets

Comments:
ASUSTek surprised with better than expected earnings.  However, the bad side of the news is that it forsees weakening demand in Q4.  It's no secret that the netbook market is drying up, but modest tablet sales (driven by the company's Android ASUS Transformer) for ASUSTek indicate that the company should survive that transition without major issues.  Supply issues remain a problem for ASUSTek, though, and are hindering tablet sales.

HTC Corp. (TPE:2498)
[Source]

Evo 3D and HTC Flyer
[Image Source: Google Images]

Business segment:
tablet, smartphone OEM
Revenue:
NT$135.82B ($4.55B USD)
0.5% lower than consensus
Profit:
NT$18.7B ($626M USD)
Units Shipped:
13.2 m "units" (tablets+smartphones)
Q4 Outlook
NT$125B-$135B ($4.19B-$4.52B USD)
9.0-15.7% lower than consensus
12-13 m units shipped

Comments:
Like ASUSTek, HTC predicted a relatively weak Q4.  Unlike ASUSTek, HTC disappointed in sales in the current quarter.  HTC has established itself as a top tier Android handset manufacturer, but it's struggling to break through to the next level -- vying with Apple and Samsung for the global sales lead.  It's also struggling to gain tablet market share.  And to top things off, HTC lost its request for a preliminary injunction against Apple's iPad and iPhone.  If the U.S. International Trade Commission decides to ban imports of HTC's smartphones and tablets as Apple is requesting, HTC now has much less bargaining room, as a result.

Hon Hai Precision Industry Co Ltd. (owner of Foxconn) (TPE:2317)
[Source]

Foxconn Workers
[Image Source: Telegraph UK]
 
Business segment:
gaming console, tablet, smartphone, mp3 player, laptop, desktop, and computer component ODM
Revenue:
NT$665.66B ($22.29B USD)
0.2% increase from Q3 2010
Profit:
NT$19.2B ($643M USD)
8.6% less than Q3 2010, 6.67% better than analyst consensus
Outlook:
not available

Comments:
Clearly Hon Hai's Foxconn unit's revenue was expected to be hurt by lower than expected shipments from its biggest smartphone customer -- Apple.  However, the company still managed to beat profitability expectations.  Virtually all electronics companies in the industry rely on Foxconn for some of their product manufacturing needs, so the company is somewhat of a barometer for the market in general.  The company is moving aggressively to replace volatile [1][2][3] and increasingly expensive Chinese labor with reliable robots.  It's also looking to migrate factories to Brazila and Inner China -- regions where costs remain relatively low.

Sources: ASUSTek, HTC, Hon Hai



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RE: Wisdom is dead.
By JasonMick (blog) on 10/31/2011 1:07:10 PM , Rating: 2
quote:
Without workers who create demand who's going to be in a position to buy anything in China? Their middle class may disappear even before they establish themselves. Is that what US corporations were expecting of a future Chinese market?

Henry Ford was the first to pay his workers $5/day and greatly benefited from the move. One thing it did, it allowed his employees to buy his cars.

If you're arguing against automation, that's nonsense.

America, which is currently roughly a third of the size of China, has already gone through the somewhat painful transition of being a human manufacturing giant to an engineering and design giant. Japan, Europe, and South Korea have all seen similar transformations.

While it's true that the most difficult assembly jobs (e.g. auto assembly, given the large size) will continue to partially rely on humans for a time, easier jobs will inevitably be automated.

Society in China will adapt just like it has in its foreign peers -- the occupations will shift.

Ultimately, a society is only as productive as what it produces in terms of both manufactured goods and engineered designs. The revenue from these items are split up among society. When the emphasis in terms of human labor shifts from manufacturing to engineering, there's not a major shift in wealth distribution. You still have low-end service jobs (e.g. fast food worker, grocery store worker, etc.) and high-end technical jobs (engineer, doctor, etc.).

It's just that society overall has to do less backbreaking work. THAT IS A GOOD THING.

Will automation hurt in the long term? Sure. But arguing against it is attempting to preserve short term gains at the cost of long-term prosperity.


RE: Wisdom is dead.
By YashBudini on 10/31/2011 1:30:26 PM , Rating: 2
quote:
If you're arguing against automation, that's nonsense

I addressed supply and demand, automation was not on the table.

quote:
Society in China will adapt just like it has in its foreign peers -- the occupations will shift.


Shift offers 2 directions, up or down. What kind of shift are you seeing here?

quote:
It's just that society overall has to do less backbreaking work.


Non-sequitur, again. And a lousy deflection at that.

quote:
But arguing against it is attempting to preserve short term gains at the cost of long-term prosperity

Now there's irony . You really missed the Henry Ford argument, didn't you? Like every conceivable aspect of it. No demand, then what?


RE: Wisdom is dead.
By JasonMick (blog) on 10/31/2011 2:21:25 PM , Rating: 2
quote:
I addressed supply and demand, automation was not on the table.

If I understood you correctly, you argued that the death of manufacturing jobs would create a lack of demand.

I countered this explicitly, by pointing out that people would instead be making money off of other kinds of jobs (e.g. service sector or engineering jobs) so demand would NOT drop in the long term.

quote:
Shift offers 2 directions, up or down. What kind of shift are you seeing here?

Up. Automation allows society to have the same amount of product, with less physical work. Consequentially this frees man to pursue more mental work and produce superior products. Either way -- less work and same product, or better product and different kind of work -- mankind in general benefits.

And there's plenty of demand because service sector and engineering jobs pay money, and there's supply from the automated manufacturing, engineering, and service supply from the service sector.

quote:
Now there's irony . You really missed the Henry Ford argument, didn't you? Like every conceivable aspect of it. No demand, then what?

Again I didn't "miss" anything.

There's plenty of demand in America today. Service sector jobs and engineering jobs, et al. produce demand just like manufacturing jobs. Because they ALL PAY MONEY. That's the bottom line.

Automation does not change this.

There were paying jobs and thus demand before automation, and there's STILL paying jobs and demand after animation.

Your demand commentary is unfounded alarmist commentary, imho.


RE: Wisdom is dead.
By YashBudini on 10/31/2011 5:12:45 PM , Rating: 2
Again it has nothing to do with automation. It could just as easily be job exportation. Why keep bringing this up?

quote:
There's plenty of demand in America today.

The state of the current economy begs to differ.

Let me give you an example:

1. I had a list of things that I wanted to buy at some time or another. Operative word - had.

2. Lost my job. Spending is limited to bare necessities.

3. When I am employed again guess what? I will not be buying anything, for years pal, not just through next week. If ever actually.

Is that your version of demand at this point in what's routinely called the Great Recession? Or are all those people just alarmists as well?

And stuff I used to deem worn out to be thrown away? I continue to get use out of it, regardless of condition.

Now that's just my opinion, but in case you haven't noticed a blizzard is made up of individual snow flakes. No single unit amounts to anything. But add them all up. How many others think the same way about spending? Take a guess, just out of the last batch of lay offs?

You export or automate 1 profession and then the economy recovers, and again, and again (beyond your limited viewpoint of just manufacturing jobs). You really believe this can continue forever? No matter how many times it's been done? It will never have a negative impact on an economy? So what percentage of the nation will be doctors and what percentage will be hamburger flippers in this wonderful future utopia?

And before you bring it up, I spent the last 5 years retraining for a high demand job. Got a degree with honors, but junior and entry level jobs are being filled by people with many years of experience. Supply and demand again, not the theory you're preaching.

The Chinese are going to become more like the US middle class than they ever dreamed of and at a far faster pace. Like you they forgot what Ripley said:

quote:
You know, Burke, I don't know which species is worse. You don't see them f@cking each other over for a goddamn percentage.


quote:
Your demand commentary is unfounded alarmist commentary, imho

Speaking of "unfounded" I'd like to see some graphs on whether the "job creators" of the pre-21st century have actually done any job growth at any point in this century at all.

And I don't see any need to call me an alarmist. Chicken Little tried to get people to stop the sky from falling. I'm not making any attempt at that at all. Nobody's listening, let alone actually giving a damn. It simply is what it is. I just wish Henry Ford was here to voice his opinion.


RE: Wisdom is dead.
By YashBudini on 11/1/2011 11:47:58 AM , Rating: 2
Speak up Jason, I can't hear you.

Another odd thing about demand. DT has some of the slowest web services among these types of web sites, and yet what chance is there DT will start using decent horsepower to run it? So much for the T in DT, and thank the owner for doing his part in keeping this economy going.

I'm sure nobody is "alarmed."


RE: Wisdom is dead.
By Solandri on 10/31/2011 1:36:32 PM , Rating: 2
quote:
America, which is currently roughly a third of the size of China, has already gone through the somewhat painful transition of being a human manufacturing giant to an engineering and design giant. Japan, Europe, and South Korea have all seen similar transformations.

More to the point, if the U.S. had gone full speed ahead with automation during the 1980s and 1990s, a lot of the manufacturing which has been shipped to China would have stayed here. The workers who lost their jobs would have had to have been retrained for other jobs like running and maintaining the robots, but that significant chunk of manufacturing GDP wouldn't have been lost, and the money would have stayed here instead of being shipped overseas to pay someone else to make stuff for us.

Foxconn has seen the mistake the U.S. made and is taking steps to prevent the same thing from happening to it. When the cost of labor in China rises, their manufacturing jobs will not go to Thailand, Malaysia, Vietnam, etc. They will stay in China, using robots as laborers. Chinese workers will be the ones maintaining those robots, and Chinese companies will be the ones still making profit.

Meanwhile we in the U.S. look on forlornly wondering what might have been had we not decided that jobs were more important than improved efficiency. If you pass up an easy efficiency improvement in order to protect something else (be it jobs, profit, or whatever), your decreased competitiveness opens the door to someone else swooping in and stealing away your business.


RE: Wisdom is dead.
By Master Kenobi (blog) on 10/31/2011 2:18:02 PM , Rating: 2
True. The U.S. is on a downward spiral at this point and it remains to be seen how far down it will go before we correct it, or implode. Either way we really screwed the pooch by not moving to automation sooner.


RE: Wisdom is dead.
By YashBudini on 11/1/2011 3:17:36 PM , Rating: 2
quote:
The U.S. is on a downward spiral at this point and it remains to be seen how far down it will go before we correct it, or implode.

This contradicts Jason's claims. How can that be?

It would be rather deserving if US corporations going "global" suddenly conclude there isn't going to the the massive middle class development in China they had hoped for. And good luck selling Coke, Pepsi, Big Macs, Marlboros, and Budweisers to those who will be lower tier than the robots that replace them. But since we as people are now officially 2nd class citizens to corporations (nice move Supreme Court) why shouldn't they also be 2nd class citizens? That's what you get for following the leader.


RE: Wisdom is dead.
By YashBudini on 10/31/2011 5:17:44 PM , Rating: 2
quote:
if the U.S. had gone full speed ahead with automation during the 1980s and 1990s, a lot of the manufacturing which has been shipped to China would have stayed here.

Well this is the Detroit mentality, and the irony of what Jason said. This is thinking for short term profits at the expense of long term profits. You think any of those people will ever buy a product from the company that gave them "Das Boot?"

Jason also sidesteps the number of people who are now underemployed in the US, and not by choice either. How much demand do they create? Hint - time to clean those rose colored glasses again.


RE: Wisdom is dead.
By wallijonn on 11/1/2011 11:01:26 AM , Rating: 2
quote:
Meanwhile we in the U.S. look on forlornly wondering what might have been had we not decided that jobs were more important than improved efficiency. If you pass up an easy efficiency improvement in order to protect something else (be it jobs, profit, or whatever), your decreased competitiveness opens the door to someone else swooping in and stealing away your business.


The swooper usually has cheaper labour, not better robots, since robots cost a lot of money.

The problem is the current state of Corporate Capitalism, where a CEO makes 1000x the salary of the lower worker instead of 10x-100x, as it was years ago. When he gets a raise the same amount of people, usually at the lowest rung on the corporate ladder, are laid off.

The American Car Industry got in the mess that they're in because of marketing, not because of labour. The past two decades the people were sold on higher profit SUVs, not gas efficient and reliable cars. It was greed that killed the electric car. It was greed that drove SUV sales. And it was greed that caused the present economic downturn. Marketing is driven by the board & Wall St., who only think of the bottom line.


RE: Wisdom is dead.
By YashBudini on 11/1/2011 11:42:25 AM , Rating: 2
But all the pundits employed by Rupert Murdoch say it's all the unions fault. Was that Faux News?

quote:
Marketing is driven by the board & Wall St., who only think of the bottom line.


quote:
Marketing is driven by the board & Wall St., who only think of the sort term bottom line.


Fixed it for you.


RE: Wisdom is dead.
By KamiXkaze on 11/1/2011 9:37:40 PM , Rating: 2
Part of the reason SUV did so well was at the time the U.S. had cheap gas, plus they found a loop hole avoiding the gas guzzler tax. When gas got high exit the demand for SUV.

kXk


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