Closure of Chinese factories to impact electronics industry

By THE NATION

 

Thailand's electronics industry could be affected by the closing down of factories in China's Hubei province due to the outbreak of the novel coronavirus (Covid-19).

 

Soraphol Veerametheekul, senior director at Kasikorn Securities Plc, said that most of the factories in those areas are automobile manufacturers which require raw materials such as electronic components from Thailand,” he said.

 

“The outbreak could affect Thai manufacturers for another two months, as the Chinese government expects the situation to be resolved by March when factories will resume their operations at 70-80 per cent.”

 

Soraphol estimated that companies which will be impacted include KCE Electronics Plc (KCE), which has revenue ratio from China at 10 per cent of its overall revenue. “The company’s profit could go down by 5 per cent,” he said. “However, currently the company has yet to adjust original profit estimation at Bt1.184 billion, or 35 per cent increase from last year.”

 

KCE’s gross margin of 2020 should stand at 23-25 per cent, while last year was at 20 per cent, thanks to reduced cost, increased sales of product mix, and the weakening baht. “The company estimates that the baht will continue to weaken in the first half of 2020 and start to strengthen in the second half, resulting in a suitable price of Bt23.3 for each KCE share,” he added.

 

Meanwhile, Hana Microelectronics Plc (HANA) estimated their revenue in the first quarter of the year to go down by 5 per cent as they have a 10-15 per cent revenue ratio from China. The company expected this year’s profit to be Bt1.8 billion, or a 10 per cent increase from last year’s Bt1.645 billion due to overall revenue increase of 5 per cent or Bt21.377 billion and estimated gross margin at 11-12.5 per cent. HANA's suitable price this year should stand at Bt40.5 per share.

 

“The impact of factories closing in China will last for a brief period for KCE and HANA, but both should recover nicely after US and China sign the second phase of the trade agreement before the US election. When the share price goes down, it is therefore a good opportunity to buy,” said Soraphol.

 

Source: https://www.nationthailand.com/news/30382063

 

 

-- © Copyright The Nation Thailand 2020-02-13

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A good reminder to the west to keep their supply chains closer. It was a grave mistake to start using China's low cost labor.

1 hour ago, DrTuner said:

A good reminder to the west to keep their supply chains closer. It was a grave mistake to start using China's low cost labor.

Its already too late.  Given this happened over a generation ago, the expertise is in China now.  GE found out that their US facilities did not have the production experience that their Chinese facilities have.

 

Many western countries have very strict pollution controls too, which makes it difficult to do anything.  Western loans are also not about business, but consumption: houses, cars

The impact of factories closing in China will last for a brief period for KCE and HANA, but both should recover nicely after US and China sign the second phase of the trade agreement before the US election. When the share price goes down, it is therefore a good opportunity to buy,” said Soraphol
 

Some serious speculation ????

A post using a derogatory term toward the Chinese has been removed.  Continue to use that term and a warning will be coming. 

Well I work in the US Defense Industry and supposedly we don't use much if any chinese electronic components.  Now for commercial stuff, well I don't own nor buy much (I still have an LG flip top phone.. 3g, voice and text only) so I am not sure how I would be affected.

17 hours ago, DrTuner said:

A good reminder to the west to keep their supply chains closer. It was a grave mistake to start using China's low cost labor.

A huge slow down or expense spike just may drive some companies to keep things closer or in their home countries.

" The Chinese government expects the situation to be resolved by March "

From what I have been reading that is optimistic to say the least.

Nissan in Japan has just shut down because of component supply problems from China.

I've had some stuff on order from China for weeks.

Nothing is moving, no packing, no shipping.