KUALA LUMPUR: KESM Industries Bhd is unperturbed by the ongoing trade war between the two largest economies, United States and China, saying that the impact on its operations is only temporary.
The semiconductor industry 'burn-in and test' service provider, whose production volume has declined around 15 per cent over the last six months as its customers turned cautious, believes the growing demand for semiconductor chips and sensors in the automotive industry will drive the company’s growth in the long term.
“I don't expect this trade war impact to continue and KESM's growth is not dependent on PC (personal computer) market, phones or appliances.
"The automotive market, which has seen a rise in autonomous cars, has brought in new technologies and therefore the need for testing, and this is the main business we are in.
“So we look forward to continued growth. Our growth fundamentals are strong," KESM executive chairman and chief executive officer Samuel Lim Syn Soo told reporters after the group's annual general meeting here today..
KESM achieved a revenue of RM349.8 million in the financial year ended July 2018, three per cent increase from RM338 million recorded in the financial year 2017.
However, it recorded a net profit of RM39.3 million in the financial year, representing a decrease of 11 per cent, compared with RM44 million posted in 2017, mainly due to supply issues and higher taxes.
For the first quarter ended October 31, 2018 (1QFY19), its net profit fell to RM2.64 million from RM11.38 million in the previous year. Group revenue dropped 10 per cent to RM81.56 million from RM90.71 million previously.
CIMB Research, in its last report on KESM, said the firm’s utilisation fell below 60 per cent in 1QFY19 mainly due to inventory adjustment at its immediate customers in the light of the escalating trade war.
KESM was also impacted by higher raw material costs related to the electronics manufacturing services, the research firm added.
However, CIMB Research expects stronger demand and adoption of electric vehicles to drive semiconductor component demand, which bodes well for KESM.