Q1. The COVID-19 pandemic has affected the operations of companies worldwide. What is the current status of the Group’s five factories in terms of operating levels?
The Group’s factories in Singapore, Malaysia and China are presently operating at normal levels while our factory in the USA is also back to its normal level as of several weeks ago. At our factory in the Philippines, machines continue to run at normal levels; however our workforce is currently below normal staff level due to the resurgence of COVID-19 in the country.
Back to topQ2. Has there been any change in customer demand and price pressure on your products due to the COVID-19 pandemic?
We have noticed a change in the purchasing pattern of customers, particularly in China. Previously, customers would generally buy our products on a Just-In-Time basis as and when required for their manufacturing. However, in the past months, we have seen some customers ordering additional stock of our products in case of future disruptions in the supply chain. This pattern may be a temporary shift depending on industry conditions and the COVID-19 situation. While price pressure is part and parcel of doing business in the semiconductor industry, we have not seen much erosion in our product prices due to the present firm market demand.
Q3. How do the restrictions by the USA on sale of products to China affect the Group?
The Group’s philosophy has always been to provide local-to-local support to the customers in our primary markets. As such, our factory in Suzhou primarily serves customers in the domestic market and does not export products out of China. However, the Group could be indirectly affected by the USA’s restriction as some of our customers export their products out of China. Having said that, the Group’s sales in China still grew 9% in FY2020.
Q4. Will the Group’s business be affected by its customers shifting their manufacturing out of China to other countries?
Although China is our largest single market with a contribution of 29% to Group sales in FY2020, our sales to customers located in Southeast Asia is bigger. In FY2020, our combined sales in Singapore, Malaysia, the Philippines and Thailand amounted to 36% of the Group’s sales. Hence, we are in a good position to benefit if customers shift their manufacturing activities to Southeast Asia as we can continue to serve them from our factories in these countries.
Q5. The Group’s sales in Taiwan increased 23% in FY2020. Will the Group be looking to set up a new factory in Taiwan if your sales there continue to grow?
We are closely observing the Taiwan market. This market focuses more on wafer fabrication, while most of the chip packaging activities take place in China. Hence, there may not be a requirement for the Group to start a new facility in Taiwan.
Q6. The Group disclosed that its USA factory recently received customer qualification for a family of ultra-critical parts used in the wafer-fabrication process. How significant is the project for our USA operations and when will production of these parts commence?
Yes, this is a significant project and milestone for our USA operations. We have developed unique competencies for this project and are focusing on areas that many suppliers are finding increasingly difficult to do. Indeed, our qualification over the customer’s long-time incumbent supplier was based on the superior quality and lower cost of our products. Production of the parts is expected to commence during 1Q21. Ultimately, our aim is to become an elite supplier for critical parts used in semiconductor wafer-fabrication.