Asia Tech Stock Weekly Summary (June 8-14, 2009)

Japan

Telecommunications

• The Japan communications ministry has approved business plans for LTE services for four mobile operators, NTT DoCoMo (DCM), KDDI (KDDIF.PK), Softbank Mobile (SFBTF.PK), and Emobile, according to the Nikkei. The operators are expected to begin roll-out in September 2010 until late 2012. NTT DoCoMo has earmarked 343 billion yen (US$3.5 billion) for the LTE investment, while KDDI and Softbank have budgeted 515 billion yen (US$5.2 billion) and 207.3 billion yen (US$2.1 billion), respectively.

• Japan's Nippon Telegraph and Telephone Corp. (NTT) should split its fixed-line telecom operations into facilities and services divisions, according to KDDI Corp. President Tadashi Onodera. Discussions on the next stage of reorganization for NTT, the former state-run telecommunications monopoly, are to kick off in 2010. Onodera said he intends to propose the separation of the operations as a topic during the discussions. The KDDI chief is calling for the change because of the difficulty involved with assessing whether NTT's circuit-leasing charges are fairly priced under the current structure. Onodera also called on NTT to release its fixed-line telecommunications infrastructure development plans as soon as possible.

• NTT DoCoMo finished Q109 with over 54.6 million customers. Although it continued to lose ground to its rivals, with its market share slipped to 50.8 percent, its quarterly performance was the best in almost three years. It added 445,600 customers, the highest figure since Q206, and a number almost twice as high as the 237,200 gain recorded in Q108. Annual growth has been sluggish at 2.3 percent, but this number is still significantly better than the year-earlier figure of 1.5 percent. NTT DoCoMo's customer base is dominated by 3G users, with 49 million or 89.8 percent of its total base using W-CDMA handsets at the end of Q109. The main reason for Q109's strong net additions figure was the PDC customer base seeing a smaller loss than in the year-earlier quarter. While it lost 1.63 million in Q108, in Q109 it was only down 1.10 million.

Mobile/ Wireless

• Intel Capital, Intel Corporation's (INTC) global investment organization, invested US$43 million in Japan-based UQ Communications, a provider of WiMAX mobile services. UQ Communications will utilize the funding to continue the nationwide expansion of UQ WiMAX service in Japan, with a commitment to provide WiMAX coverage to 90 percent of the country by 2012. Intel has played a large role in the proliferation of the WiMAX global standard. The company has worked closely with computing and communications manufacturers to embed WiMAX-enabled chipsets in devices, and has made significant capital investments worldwide to help service providers build and deploy networks and address spectrum and regulatory needs. To date, nearly 460 WiMAX networks have been deployed in 135 countries.

Semiconductor

• Toshiba Corp. (TOSBF.PK) said it will shoulder US$307 million in restructuring costs from shutting down its old system chip and discrete chip lines as it seeks to unload losses. Toshiba plans to cut production capacity for lines that process 150-millimetre or smaller silicon wafers by 30 percent in the year to March 2010. The move comes after talks to merge Toshiba's system chip operations with NEC Electronics Corp floundered at the end of last year, with NEC Electronics (NELTY.PK) announcing in April that it planned to merge with Renesas Technology Corp. Toshiba, which expects losses to continue on its chip operations this year, plans to scrap two lines at its Kitakyushu plant in southern Japan, stop production at two lines in Himeji in western Japan, and reduce production at two more plants, a spokeswoman said. Toshiba has said it aims to cut fixed costs by around 100 billion yen in its chip business this financial year. The company's chip operations incurred an operating loss of about 280 billion yen in the last financial year, due to a steep fall in memory and system chip prices.

Korea

Semiconductors

• A South Korean investment fund led by KTB Securities signed a deal to buy chipmaker MagnaChip Semiconductor for an undisclosed sum. Magnachip, which makes image sensors for mobile phones and display driver chips for flat-screens, was put up for sale as it struggled under heavy debt and a severe industry downturn. The company was formerly a unit of Hynix Semiconductor and was bought by CVC and Francisco Partners in 2004.

• LS Industrial System will establish LS Power Semitech with Infineon Technologies (IFX) of Germany, to focus on semiconductor modules for home appliances. LS Industrial System will be able to expand the business areas from existing industrial equipments to cutting-edge home appliance products. The company has signed the contract with Infineon to establish the joint company, with capital for LS Powertech amounting to is 23.3 million euros (US$32.6 million). LS Industrial System will have a 54 percent share and management rights while Infineon will have a 46 percent share. Infineon will invest in IPR, technology, process know-how, and a production facility of CIPOS, its semiconductor module brand for electricity. The two companies are going to closely cooperate for product development, production and global marketing. LS Power Semitech will launch at the Chunan Plant in August. The production facility will be finished by year-end and begin mass-production of CIPOS in January. In the first year alone, about 2 million modules will be produced.

Hardware

• Samsung Electronics Co. (SSNLF.PK) has signed a deal to supply a Saudi Arabian company with technology that helps facilitate high-speed wireless Internet connectivity. Mobily, Saudi Arabia's second-largest mobile carrier with 14 million subscribers, has recently agreed to exclusively use Samsung's WiMAX networks and other facilities for its mobile service, under a US$100 million-contract. WiMAX, the acronym for Worldwide Interoperability for Microwave Access, is one of the latest telecommunications technologies that allow wireless data transmission at broadband-like speed. South Korea has its own technology, dubbed WiBro, in commercial service. Only 4 percent of Saudi Arabians are reported to use broadband Internet technology. Samsung has recently beefed up efforts in exporting equipment and networks for the wireless technology to the Middle East. It signed a deal last December with Kuwait's mobile carrier MADA communications.

• LG Electronics Inc. (LGERF.PK) will maintain its earlier target of 10 percent for the global handset market this year. In 2008, the company gained an 8.5 percent share. Despite ongoing concerns that the global handset market in 2009 will shrink by about 5 percent to 10 percent, Skott Ahn, President and CEO of Mobile Communications at LG, expects the company's market share in China to triple this year from 2 percent last year. LG will also launch a smartphone using Google Inc.'s Android platform sometime this year.

China

Internet

• Yahoo! (YHOO) has opened a global research and development center in Beijing to tap into China's pool of intellectual talent as it seeks to reduce costs. The center - the third for Yahoo!, with the other two located at its U.S. headquarters and in India - will focus on search, advertising and other personal Internet tools and technologies. The facility will be operated independently from the Alibaba Group, China's biggest e-commerce portal that controls Yahoo!'s operations in the country. Yahoo! owns 39 percent of Alibaba (ALBCF.PK) , which also runs China's top online auction site Taobao.com and business-to-business e-commerce platform Alibaba.com. The launch of the Beijing center came after Yahoo! reported a nearly 80 percent slump in its net profit in the first three months of the year, due to the economic downturn, and after announcing that it would trim its workforce by 5 percent.

• Sina Corp. (SINA) said online advertising sales would rebound as property and vehicle clients increased spending, after reporting a 31 percent drop in quarterly profit because of a decline in revenue. Third-quarter advertising sales were expected to increase from the current quarter. Still, the year-on-year comparison is challenging. First-quarter advertising sales fell 9.8 percent from a year earlier. First-quarter net income dropped to US$9.75 million from US$14.1 million a year earlier with advertising sales fell to US$43.2 million from US$47.8 million. Non-advertising revenue - comprising mostly ring tones, games and other services sold to mobile-telephone users - gained 30 percent to US$30.6 million.

Software

• Microsoft (MSFT) has been asked to pay compensation of more than 70 million yuan (US$10.2 million) by Shenzhen-based quality certification service provider Mowom for Microsoft's failure to fulfill a 2005 contract. Microsoft and Mowom signed a contract to provide information management systems to Changsha cigarette company Baisha, but Microsoft failed to provide the service. Mowom has appealed to the China International Economic and Trade Arbitration Commission for a settlement.

Telecommunications

• Huawei Technologies Co. is open to a partnership with ITI Ltd., just days after the Indian state-run telecom equipment maker invited initial bids from investors interested in buying a stake in three of its six manufacturing plants. Huawei officials have already held exploratory talks with the government. Huawei Technologies India Pvt. Ltd. and ITI are now jointly rolling out state-run Bharat Sanchar Nigam Ltd.'s wireless expansion in south India. The two also have a joint venture to manufacture transmission equipment. ITI is planning to set up three special purpose vehicles or joint venture companies for each of the three units, with equity participation from local or global telecom equipment manufacturers, a bid document for consultants on the company's Web site showed. The investor will have a 51 - 74 percent controlling stake, with ITI owning the balance. ITI has been struggling to win new orders and generate revenue after global equipment makers gathered market share on the back of the latest technology and low-cost offerings.

Hardware

• Lenovo Group (LNVGY.PK), which saw another quarter of losses because of the economic slowdown, posted much-needed double-digit gains in its nascent international server business in the first three months of the year. While each of the world's top five server suppliers suffered a decline in revenue and shipments in the first quarter, Lenovo recorded a 12.3 percent year-on-year gain in revenue to US$19 million and a 32.6 percent increase in shipments, to 10,894 units. IDC market intelligence firm and technology research company Gartner noted that Lenovo was growing from a lower base compared with market leaders Hewlett-Packard (HPQ), IBM, Dell (DELL), Sun Microsystems (JAVA) and Fujitsu (FJTSY.PK). Lenovo's first-quarter market share by revenue was 0.2 percent and its unit shipments made up 0.7 percent of the industry total. First-quarter revenue of the worldwide server industry fell 24.5 percent to US$9.9 billion. Gartner estimated total global shipments were down 24.2 percent to 1.72 million units.

Alternative Energy

• Yingli Green Energy (YGE) and U.S.-based solar energy company Recurrent Energy have entered into a sales agreement. Yingli will supply Recurrent Energy with crystalline PV modules through 2012 for projects, typically ranging from 2-20MW, in the U.S.