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SARS Hasn't Hurt Asia/Pacific Semiconductor Manufacturing, Yet
21 April 2003
Kay-Yang Tan, Jamie Wang

Document Type:  Dataquest Perspective
Note Number:  SEMC-WW-DP-0266
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Semiconductor manufacturing in the Asia/Pacific region is unscathed by the severe acute respiratory syndrome outbreak. But growth could falter if SARS dampens consumer demand.

Table of Contents


SARS Initially Did Not Hurt Contract Manufacturing [return to Table of Contents]

The Asia/Pacific electronics industry has remained surprisingly impervious to the outbreak SARS. However, if SARS persists or worsens, it may damage the entire global supply chain. Moreover, damage to the chip market might not appear as quickly as in the retail, tourism or airline industries even though threats still exist. Thus, marginal impacts in the early stages of the crisis may herald stronger effects later on. In other words, the industry should handle SARS carefully.

Foundry [return to Table of Contents]

For now, SARS has had negligible effects on the regional foundry industry. In fact, the top two foundries from Taiwan recorded strong sales growth for March despite the SARS scare. Taiwan Semiconductor Manufacturing reported revenue of $397.2 million in March 2003, a 12.2 percent increase over February 2003. Similarly, United Microelectronics saw revenue of $202 million, up 29.7 percent from the previous month. LCD driver, power management integrated circuit, graphics and wireless applications largely drive the early stages of this rebound.

The robust orders, mainly from leading- and trailing-edge technologies, signal a further possible uptick in the second quarter of 2003. The fab utilization rate in the second quarter of 2003 should top 65 percent, with wafer shipments increasing 25 percent quarter over quarter. Gartner Dataquest predicts that in 2003, revenue from Asia/Pacific foundry production will grow 27.1 percent from 2002 to hit $10.4 billion (for further details, see "Asia/Pacific Foundry Industry Trends, 2002," SCSI-AP-MT-0118).

Electronic Contract Manufacturers [return to Table of Contents]

Initial projections by most electronic contract manufacturers (ECMs) indicate that orders remain unaffected by SARS. Until now, manufacturers appeared more concerned about how the war in Iraq would affect the global supply chain. Acer, for instance, mentioned that orders from Europe, the Middle East and Africa (EMEA) and from the United States declined 10 percent to 20 percent since the start of the war, whereas the effects from SARS appeared trivial. In Taiwan, some leading ECMs boosted their March 2003 revenue with orders increasing in both EMEA and Asia/Pacific. Quanta Computer, the leading notebook PC maker, said recently that its monthly revenue exceeded NT$20 billion (US$576 million) for the first time in March, hitting NT$22.55 billion.

Gartner Dataquest Perspective [return to Table of Contents]

For decades, the Asia/Pacific region has served as a bastion of electronics manufacturing. The rapid growth of the electronics sector, boosted by the expanding demand for semiconductor devices, powered many Asian economies. SARS will affect growth in the semiconductor industry to the extent that it dampens regional or global demand. It remains difficult to tell how serious and widespread the SARS outbreak will become. For now, at least, it has not crossed the threshold where uncertainties and fear start to paralyze economic activity apart from isolated "hot spots" such as Hong Kong and Singapore. Nevertheless, if consumer spending sours in a significant portion of the world, prospects for growth in the second half of 2003 might be derailed.

Key Issue

How will semiconductor manufacturing grow in this region?

This research is part of a set of related research pieces. See AV-19-7721 for an overview.