Taiwan's high-tech sector to suffer prolonged weak demand

Continued oversupply and weak product pricing are likely to drive RAM companies to perform badly over the next two quarters.

In a release by Standard & Poor's, it was found out that Taiwanese Dynamic Random Access Memory companies are likely to have very weak performances over the next two quarters because of continued oversupply and weak product pricing. That's according to an article, titled "Industry Report Card: New Product Launches Are Unlikely To Restore Demand For Taiwan's High-Tech Firms In 2012."

Here's more from Standard & Poor's:

In addition, prolonged weak demand over the next two quarters will pressure margins among local electronics manufacturing service and electronic component companies, says the report.

Highly anticipated new product launches in the second half of 2012 could bolster demand in Taiwan's high-tech industry. But this might not be enough to fully overcome the drop in firms' revenues over the past few quarters.

"We believe that while the launch of new generations of smart phones and touchscreen notebook PCs running Windows 8™ could revive business momentum in late 2012, the weak global economy hampers a full recovery," said Taiwan Ratings' credit analyst Daniel Hsiao. "However, we expect most high-tech firms that we rate to maintain strong-to-adequate liquidity over the next two quarters, which should help to absorb greater demand volatility without reaching a rating trigger."

According to the report, credit outlooks have shifted to negative from stable over the past six months. Taiwan Ratings Corp. rates nine local high-tech companies, of which three ratings carry a negative outlook and the rest have stable outlooks, compared with almost entirely stable rating outlooks a year ago. This is also in line with Standard & Poor's negative rating bias for the global technology sector and reflects a number of key factors in the high tech sector.