Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on November 22, 2018

KUALA LUMPUR: Local technology-related stocks, especially those exposed to the Apple iPhone supply chain, were battered yesterday by reports on the US tech giant slashing production orders and price-fixing shenanigans in China’s tech sector, which could worsen sentiment, an analyst said. Recent news reports said that Chinese investigators had found “massive evidence” of anticompetitive behaviour of the world’s top three makers of computer memory and were in the midst of a price-fixing investigation.

Malaysian Pacific Industries Bhd, whose units manufacture, assemble, test and sell integrated circuits, semiconductor devices, electronic components and lead frames to customers worldwide, was the biggest loser of the sector yesterday, declining 50 sen or 4.08% to RM11.74. Some RM99.5 million in its market value was erased. An Apple gesture sensor component producer, Globetronics Technology Bhd fell six sen or 2.94% to RM1.98.

Relatively unscathed was Inari Amertron Bhd, even though some 46% of its revenue is derived from the radio frequency (RF) parts it produces for Apple. It ended one sen or 0.57% lower at RM1.74. AmInvestment Bank Research analyst Tan Kai Bin said investor confidence may have persisted on Inari’s plans to diversify its revenue stream. “Management has said that it is looking to grow its LED (light-emitting diode) for the digital billboard business. When the business kicks off in full, it said, the scale will be bigger than the RF division,” he told The Edge Financial Daily yesterday.

“Inari has suffered a lot in the past few weeks, and its lowest level this year in April (RM1.59) may well be its support level,” Tan added, saying it may benefit when broadband networks are upgraded to 5G.

“The commercial roll-out [of 5G] may only take place in two or three years. So for traders, Inari may not be good in the short term.”

On Monday, The Wall Street Journal reported, citing industry sources, that Apple told suppliers about its plan to slash production of the iPhone XR by up to a third of the approximately 70 million units it had asked them to build between September and February. It added that as recently as last week, Apple informed several suppliers that it had lowered its production target again for the iPhone XR. World stock markets fell on Tuesday as worries over softening demand for iPhones prompted a sell-off in tech stocks.

The Malaysian bourse was closed for trading on Tuesday because of Prophet Muhammad’s birthday.

Apple has lost 6.8% since Monday. The production cuts aside, the Financial Times reported on Monday that officials in Beijing had claimed to have made important progress in a price-fixing investigation into South Korea’s Samsung Electronics, SK Hynix, and US-based Micron Technology.

The report said China will deepen its investigation into the three companies, which in total control as much as 95% of the global market for dynamic random-access memory chips used in computers and smartphones. Tan said the Chinese authorities could use the revelations as a bargaining chip, and that this could exacerbate global trade tensions, particularly with the US.

“All these factors will contribute to negative sentiment surrounding the Malaysian tech sector, at least for the next few weeks,” he opined.

Year to date, the Bursa Malaysia Technology Index has declined by 19% compared with the FBM KLCI’s 5.7% loss.

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