Trump's tech tariffs are awesome, for Southeast Asia: Tim Culpan

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(July 30): Donald Trump may well be the best thing that’s happened to Southeast Asia’s humble electronics industry in quite a while.

Relatively small, and frankly not as sexy as their North Asia cousins, makers of components and devices with factories dotted around the region may get some time in the spotlight thanks to the US administration’s decision last month to levy an additional 25% import tax on 818 separate items from China.

Assembly of name-brand gadgets like Apple Inc’s iPhones tends to grab an outsized share of attention from media, analysts and investors. Yet crucial parts of the electronics supply chain that also rely on low-cost manufacturing exist in Southeast Asia, such as capacitors, printed circuit boards, hard drives and bluetooth headsets.

Simon Shen, president of Taiwanese electronics conglomerate New Kinpo Group, oversees facilities in the Philippines, Malaysia, Singapore, Thailand and the US and he’s becoming quite a fan of the US president. Well, his tariffs anyway.

The more the US taxes Chinese electronics products, the better it is for Asian companies like his that have operations outside of China, Shen told Bloomberg News’s Cecilia Yap last week. Of course he’s talking his own book when he says that clients are very keen to hear about non-China manufacturing, especially with a Philippine IPO on the cards.

Some investors have already taken notice of the fact that Thailand, Malaysia, the Philippines and Vietnam stand as likely beneficiaries of the US-China trade war.

Thailand’s electronics components sub-index is up 14.5% in the past month against a 4.8% rise for the broader market. Eight of its 29 members have climbed by double digits over that period, led by a 20% advance for Delta Electronics Thailand Pcl. Stars Microelectronics Thailand Pcl has climbed 12%.

Perhaps investors are willing to bet that 12 straight quarters of revenue declines at Stars might be brought to an end if customers lean more on Southeast Asia. They’re also betting on Shen’s Thai unit Cal-Comp Electronics Thailand Pcl as well as Hana Microelectronics Pcl.

Viettronics Binh Hoa JSC, a Ho Chi Minh City-based assembler of electronics and components, more than doubled in the past month compared to a 4.5% decline in the benchmark Hanoi UPCoM index. The 28 members of Malaysia’s information technology sector averaged an 8.4% return compared with 4.6% for the market.

The Philippines is an exception, with its information technology index falling 0.5% versus a 5.4% advance in the Philippine Stock Exchange All Share Index. Perhaps a listing for the local unit of Shen’s Cal-Comp Technology will help turn that around, aided by a protracted US-China tariff dispute. With Trump repeatedly upping the ante, the US president is likely to remain an accidental ally. — by Tim Culpan, Bloomberg View