Worldwide PC shipments experienced the steepest annual decline in 4QCY13, which also marked the seventh consecutive quarter of shipment decline. — AFP photo
KUCHING: The technology sector is likely to see lacklustre demand for personal computers (PC) dragging down the hard disk drive (HDD) shipments, according to analysts.
In a recap, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) shared that worldwide PC shipments experienced the steepest annual decline in 4QCY13, which also marked the seventh consecutive quarter of shipment decline.
It added that volume-wise, preliminary worldwide PC vendor unit shipment for the fourth quarter of 2013 (4Q13) came in at 82.6 million of which the improvement on a quarter on quarter (q-o-q) basis was reflecive of the seasonal strength (holiday seasons).
For the whole year, PC shipments were down by 10 per cent year on year (y-o-y), which was marked as the worst decline in PC market history, equal to shipment levels in 2009.
On its take, the research arm’s concern remains on the hard disk drive HDD outlook as demand could continue to be overshadowed by the gloomy PC outlook, with an expectation of consumer preference skewed more towards the smartphone and tablet (S&T) segment.
“The overall dwindling HDD demand will partly be cushioned by the enterprise HDD amidst the increasing demand for enterprise/cloud storage.
“We believe that the growth of HDD shipment will likely remain flat in 2014 in light of the overall lower consumer spending in Desktop HDD and Mobile HDD,” it projected, adding that mobile HDD commands 65 per cent of the total market share for total HDD shipments.
All in all, Kenanga Research noted that this could translate into flat earnings growth for the HDD segment of the companies under its coverage such as Notion Vtec Bhd (circa 35 per cent exposure).
On the outlook for CY2Q14, while the global semiconductor sales continue to show solid recovery momentum, Kenanga Research does not expect general improvement to be reflected in all the companies under its coverage given the different product mix profile of each company.
“We are keeping our conviction that the companies with high exposure on resilient products such as the S&T segment and automotive segment will likely to continue benefiting from the tech upcycle.
“Delving deeper, we view that Malaysian Pacific Industries Bhd (MPI) is well poised to benefit from the positive spillover effect given that circa 55 per cent of its total revenue is expected to be derived from these segments,” it opined.
Having said that, while Unisem (M) Bhd also has a decent exposure on these segments (with circa 40 per cent), the research arm views that the ongoing products rationalization exercises could continue to suppress its profitability.
Overall, Kenanga Research kept its ‘neutral’ rating on the technology sector as it does not expect general improvement in the tech cycle to be reflected in all the companies under its coverage given the different product mix profile of each company.
However, MPI is its top pick for the sector with its resilient earnings prospects.