Taiwan's Performance in the Communication Products Segment
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15 Taiwan’s Performance in the Communication Products Segment (1) The mobile phone handset industry Most of Taiwan’s mobile phone handset manufacturers started out as contract manufacturers undertaking ODM/OEM production. Over the past few years, they have come to play a very important role within the global mobile phone industry value chain. In particular, the impact of the many years of effort expended by Taiwan’s ODM providers should not be underestimated. Several Taiwanese mobile phone makers – including HTC, ASUS and Acer – have moved into branded manufacturing, which in turn has led to a substantial enhancement of the R&D capabilities of the Taiwanese mobile phone industry as a whole. HTC is Taiwan’s largest mobile phone handset maker; it is mainly engaged in the manufacturing of smartphones that run either the Android or Windows Phone operating system. Working through strategic partners such as Google, Microsoft and Qualcomm, HTC helps to provide the latest-model smartphones to consumers all around the world. Currently, HTC’s annual shipments account for over half of Taiwan’s total annual mobile phone shipment volume, and the company has established itself as one of the world’s leading mobile phone brands. HTC handsets are marketed in Europe, North America and Asia through collaboration with local telecommunications service providers and handset distributors. HTC is also gradually starting to make headway in the Middle East, Central and South American and Russian markets. According to a statistical survey conducted by ITRI’s IEK, in 2012 the performance of Taiwan’s own-brand handset makers was negatively impacted by patent litigation and by shortages of key components, while Taiwan’s ODM providers were affected by the poor sales performance of their main customers. As a result, the annual production value of the Taiwanese mobile phone industry as a whole in 2012 was just US$14.66 billion, down 23% on 2011. New HTC One ASUS PadFone Acer Liquid Z110 Infinity LCT.indd 15 2013/5/31 下午 03:28:39 16 With respect to the anticipated performance of the Taiwanese mobile phone industry in 2013, leading Taiwanese mobile phone maker HTC is adjusting its product strategy this year, and is expected to roll out a series of new models. If the problem of component shortages can be overcome, this should ensure that the annual production value of the Taiwanese mobile phone industry as a whole is slightly higher in 2013 than in 2012. (2) The Personal Navigation Device (PND) industry Personal navigation devices (PNDs) are mainly portable in-car navigation devices. Taiwan plays an important role within the global PND industry, in terms of both brands and manufacturing. A built-in Global Navigation Satellite System (GNSS) function has become a more or less standard feature in smartphones; the trend for smartphones to replace PNDs appears to be unstoppable, and this trend became even more pronounced in 2012 when the leading smartphone vendors launched new, low-priced smartphone models that possess GNSS functionality. The main regional markets for Taiwanese PND makers are Europe and North America, where the economic downturn has caused demand for PNDs to fall even more dramatically than it has elsewhere in the world. As a result of steadily deteriorating shipment performance since 2009, in 2012 the Taiwanese PND industry posted annual production value of just US$2.1 billion, representing a marked decline. Given that there is little sign of demand for PNDs in Europe and North America picking up significantly in 2013, global market demand can be expected to continue its slide in 2013. Taiwanese PND manufacturers are starting to focus more on emerging markets, including China and ASEAN nations, anticipating that demand in these regions can constitute a new driver of sales growth. While it may not be enough to fully offset the downturn in the European and North American markets, it should at least help to mitigate its effects and slow the overall decline. (3) The WLAN industry WLAN (Wireless Local Area Network) devices constitute the single most important networking product category for Taiwan. According to a statistical survey undertaken by ITRI’s IEK, the annual production value of Taiwan’s WLAN industry in 2012 was US$3.28 billion, representing an annual growth rate of 10.5%. The gradual increase in the share of WLAN A/P routers that support 802.11ac or 802.11ad technology has stimulated some LCT.indd 16 2013/5/31 下午 03:28:39 17 demand for replacement of existing WLAN A/P router equipment. However, with the ongoing economic downturn in Europe and North America, replacement demand in the retail segment of the WLAN A/P router market has actually declined, and D-LINK DIR-505L ZyXELCommunications there has been a corresponding fall in the WAH7130 volume of orders placed with Taiwanese ODM/OEM manufacturers by their main customers. In the WLAN module segment, Wi- Fi remains a standard feature of smartphones and tablet PCs, and continued growth in market demand for these products has stimulated an increase in shipments of Wi-Fi modules. There has also been a gradual increase in demand for 1X1 Dual Band Combo modules for use in notebook PCs, and in demand for 1X1 Dual Band for use in tablet PCs, which has helped to keep average unit prices steady. With regard to the anticipated performance of the Taiwanese WLAN industry in 2013, although the share of products sold that support 802.11ac will continue to rise, there is still a 1.5-fold price disparity between 802.11ac and 802.11n, so 802.11ac will remain largely confined to high-end models for the time being; its share of overall shipment volume will remain limited. Taiwan’s networking product manufacturers have also been adjusting their strategy, beginning to increase the shipment share held by enterprise- class WLAN A/P routers, in order to mitigate the impact of weak demand in the WLAN A/P router retail market. Overall, the annual production value of the Taiwanese WLAN industry can be expected to grow by 3.8% in 2013, to reach US$3.4 billion. (4) The Ethernet LAN switch industry Ethernet LAN switches represent a product that Taiwan’s wired networking equipment manufacturers have been producing for many years. Although the last decade has not seen any dramatic growth, there has been a steady annual increase in shipments. According to a survey conducted by ITRI’s IEK, in 2012 the annual production value of Taiwan’s switch industry rose by 6% to US$2.253billion, although this was substantially lower than the 16.5% growth rate achieved in 2011. The main reason for this change was the lack of a steady recovery in the global economy in 2012, coupled with the failure to resolve the debt crisis affecting the European market (one of the industry’s most important regional export markets), which affected switch export performance. LCT.indd 17 2013/5/31 下午 03:28:40 18 Intense market competition has led to a steady decline in average switch unit pricing; an average annual growth rate in the region of 4% to 5% is projected for the period starting from 2013. Taking into account the factors outlined above, given the limited potential for market growth, it can be anticipated that the annual production value of the Taiwanese Ethernet LAN switch industry will fall by 4% in 2013 to US$2.343billion. (5) The xDSL CPE Industry Taiwan’s xDSL (Digital Subscriber Line) CPE (Customer Premises Equipment) manufacturers have accumulated many years of experience in broadband access equipment R&D and production; in recent years, Taiwanese firms have accounted for over 60% of total global DSL CPE production value. In 2012, telecommunications service providers throughout the world continued to focus on providing subscribers with higher bandwidth and a wider range of converged audiovisual services, as they competed with Cable MSOs (Multiple System Operators) LCT.indd 18 2013/5/31 下午 03:28:40 19 and Pay TV providers. In 2012, the continuing European debt crisis cast a pall over the economic outlook; in this challenging environment, VDSL (Very-high-bit-rate DSL) constituted a reliable first choice for keeping costs down, and as a result many companies initiated tenders for VDSL equipment. Deutsche Telekom and AT&T were most active in this regard. With growing demand from branded vendor customers for VDSL products, the Taiwanese xDSL CPE industry was able to achieve continued shipment growth of high- end VDSL and IAD (Integrated Access Device) products. As a result, the industry’s annual production value in 2012 came to US$2.045billion, representing an annual growth rate of around 6.5% compared to 2011. Looking ahead to 2013, given that VDSL will maintain its status as the mainstream xDSL technology, it can be anticipated that VDSL’s share of the Taiwanese xDSL CPE industry’s annual production value will continue to grow in 2013. However, with the production value of the Chinese xDSL CPE industry increasing, with no sign of an upturn in the European economy that would encourage equipment vendors to place more orders, and with the growth in VDSL shipments being outstripped by the decline in ADSL shipments, the overall annual production value growth rate for the Taiwanese xDSL CPE industry will be lower than in 2012; overall annual production value in 2013 is projected to be US$2.143billion. (6) The Cable CPE industry Taiwan has for many years been the world’s leading provider of Cable CPE (Customer Premises Equipment) ODM/OEM manufacturing services. Since 2008, Taiwan has consistently had the world’s highest market share, with global market share in excess of 80%.