Asian Tech Stock Weekly Review (October 3 - 11, 2009)

by: IRG Ltd



Elpida Memory Inc.’s (OTC:ELPDF) venture with Taiwan's Powerchip Semiconductor Corp turned profitable in July-September on rising prices of DRAM. Taiwan firm Rexchip Electronics Corp, 52 percent owned by Elpida, has operating and net profits in five quarters as dynamic random-access memory prices declined 80 percent in 2008 in a battered chip sector. If the current recovery in chip prices continues, its profit will become more substantial. Elpida’s Tera Probe turned profitable in the quarter just ended, due to increase in demand for testing of mobile DRAM used in smartphones. Other investors in Tera Probe include Taiwan's Powertech Technology Inc, U.S. module maker Kingston Technology Co and Japanese tester maker Advantest Corp.

Tokyo Electron Ltd. (OTCPK:TOELF) said orders for machines that make semiconductors and flat-panel displays almost doubled in the second quarter. Orders were up 94 percent to 97 billion yen (US$1.1 billion) in the three months ended Sept. 30. Bookings fell 8.1 percent from a year earlier. Chip-equipment orders were up 70 percent in the July-September period due to the demand from semiconductor makers in Taiwan and South Korea.

Elpida Memory Inc.’s production subsidiary had profits in July-September on rising prices of Dynamic Random Access Memory (DRAM). Rexchip will have net profit of almost 1 billion yen for the quarter, the first time to make operating net profits in five quarters. DRAM prices have increased 30-80 percent in the past three months on growing demand for high-performance varieties. Elpida will have profit accelerate as the chip prices recover.


Toshiba (OTCPK:TOSBF) has appointed a new regional distributor as it seeks to reclaim its market share after the previous dealer closed shop citing the global economic downturn. The new distributor, Mitsumi, will cover Kenya, Uganda, Tanzania, Rwanda, Burundi and Ethiopia. The company’s previous distributor from the Gulf region pulled out to take care of other investments. The partnership will also enable Mitsumi to have direct access to the official Toshiba stock from Germany and South Africa. This will cut down on time between placing an order and having it delivered to PC resellers. The partnership will enable them and their resellers to get brand new laptops and accessories as well as save them time and freight cost. Toshiba clients will now be able to deal directly with resellers appointed by Mitsumi and also be informed of where they can get protected or warranty.

Japan sales of digital SLR cameras in September fell 3.8 percent on the year in volume terms. This marks the first drop in unit sales since the company began collecting comparable data on such cameras in August 2005. Market focus is shifting to tiny, lightweight digital SLR cameras designed to the so-called Micro Four Thirds standard. These models accounted for nearly 20 percent of sales volume. Overall growth in digital SLR cameras peaked in June 2007, when unit sales rose 53 percent on the year. Demand has softened since the global financial crisis hit last fall, but up until September, the market had still managed to post year-to-year growth. Camera makers had been able to maintain sales growth by lowering prices to reduce inventories. But such moves have run their course and the year-on-year declines will likely continue in October and beyond.


NTT Communications (NYSE:DCM) has launched a service that will bridge customers on its Global e-VLAN wide Ethernet network in 11 countries to its IP VPN offering in 159 countries and regions. The optional service, named IP VPN Bridge, allows customers to seamlessly access both layer 2 and layer 3 services across its Ethernet and IP infrastructure, the company said. The Global e-VLAN service is currently available in Japan, South Korea, China, Hong Kong, Taiwan, Singapore, the US, the UK, France, Netherlands, and Germany.

NTT DoCoMo Inc is easing the pace of its M&A activity in Asia as it focuses on existing acquisitions. Cash-rich DoCoMo, which is still hungry to grow in Asia through investments in operators, wants to first solidify its services with India's Tata Teleservices and with Philippines Long Distance Telephone Co. DoCoMo controls half of Japan's saturated mobile market, where growth has stalled. It is now looking at investing in more software firms and content providers that could help DoCoMo climbed revenues as it launches its Long Term Evolution network at the end of next year. DoCoMo considers the arrival of LTE, which allows faster uploads and downloads to mobile devices, a second chance after it fumbled its push to gain global presence with its 3rd-generation phone network 10 years ago, launching its network too early.

Mobile/ Wireless

Softbank Mobile Corp. (OTCPK:SFTBF) ranked first among Japanese cellphone service providers in net subscription gains in September for the second consecutive month. Softbank Mobile gained a net 108,000 new contracts in the month, attracting new customers with a new discount plan to temporarily eliminate basic fees for switchers to Softbank from other cellphone service providers. KDDI Corp. (OTC:KDDIF) replaced NTT DoCoMo Inc. as the second-largest net contract gainer with 102,300 contracts, taking advantage of a new service offering fixed charges on calls to designated people. Emobile Ltd. came third with 88,200 contracts, followed by NTT DoCoMo with 66,000 contracts. NTT DoCoMo lost many customers on the expiration of its two-year discount service introduced in 2007.

Investments/ Ventures

Investors in the foreign exchange market are starting to speculate that plans by some Japanese companies to raise capital abroad are partly responsible for the yen's ongoing advance. One such domestic firm is Nomura Holdings (NYSE:NMR) which would carry out half of its new share sale, or some 220 billion yen (US$2.5 billion), overseas. Others tapping foreign markets for their capital-raising efforts include Elpida Memory which recently raised 63 billion yen (US$701.9 million) by selling new shares, with 57 billion yen (US$635 million) of that coming abroad.



LG Group (OTC:LGERF) will go ahead with a long-considered merger of its three telecom units in the near future to boost its consumer base and strengthen service offerings. LG Telecom and LG Powercom may hold board meetings soon. A merger is seen as necessary for LG to compete with bigger telecom rivals KT Corp and SK Telecom, as operators in the saturated Korean market focus on locking in customers through products bundling mobile, fixed-line and Internet services. KT absorbed its mobile unit KTF earlier this year while SK Telecom also controls broadband affiliate SK Broadband. LG Telecom, the biggest of the three companies, could absorb the other two given its bigger scale. LG Telecom will hold a board meeting regarding its desire to merge with LG Dacom, a fixed-line Internet operator, and LG Powercom, an Internet service unit. The telecommunication companies are affiliates of LG Group.

SK Group will sell 15 million shares in SK C&C Co. through an initial public offering on the domestic bourse in November. The preliminary indicative price range was set at 28,000-32,000 won (US$24.00-27.50). The 15 million shares are now being led by SK Group's mobile service unit SK Telecom Co. and SK Networks Co. SK Telecom and SK Networks will sell all their stakes in SK C&C through an IPO as part of efforts to restructure the group into a holding company. Woori Investment & Securities, Korea Investment & Securities and Daishin Securities are lead managers for the IPO. Merrill Lynch is the international coordinator for the share offering.


The number of the nation's subscribers to real-time Internet-protocol television (IPTV) has topped the one million mark. The country's three IPTV service providers, KT, SK Broadband, and LG Dacom, achieved the landmark, about nine months after the commercial service of IPTV started. The daily number of new IPTV subscribers increased to seven thousand in the second half of the year. The association expects the number of subscribers to surpass one-point-and-a-half million by year's end and two million early next year thanks to the expansion of infrastructure and improved service quality.


Internet home phone business of LG Dacom will surpass 2 million subscribers this month for the first time in the industry. So it is expected to reach record of reaching BEP in the shortest period among local telecommunication services. LG Dacom will surpass 2 million by the mid of this month after reaching 1.91 million in the end of last month for my LG070 service subscribers. The number of subscribers currently has increased over 100,000 a month and the proportion of internet phone among entire sales of LG Dacom has been steady increase to 11 percent in the first half of this month from 7 percent last year.

Information Technology

South Korea's trade surplus in information technology (NYSE:IT) products reached a record US$6.43 billion mainly due to a sharp drop in local demand for foreign made goods and modest export gains. Exports of semiconductors, mobile phones and other IT products rebounded into positive territory for the first time in a year by edging up 0.8 percent to US$12.24 billion last month, with imports contracting 13.6 percent on-year to just under US$5.81 billion. The surplus is the largest since the ministry started announcing IT-related trade figures in 1996, while the size of exports is the third highest tallied ever. The largest monthly export volume was reached in October 2007 when the country shipped out US$13.07 billion worth of goods. IT exports reached US$86.36 billion, with imports topping US$45.16 billion for a combined surplus of a US$41.19 billion.


Apple Inc.'s (NASDAQ:AAPL) entry in the South Korean mobile market might increase price competition, pressuring margins at Samsung Electronics Co. (OTC:SSNLF) and LG Electronics Inc. which are already pressured from weak demand. Samsung's margin from its telecommunications division including handsets, lessened to 10 percent from 11 percent a year earlier. LG's margin from handsets decreased to 11 percent in the second quarter. Apple, of Cupertino, Calif., will start selling its popular iPhone within this year as the South Korean government gave the green light for the sale of the smartphone which features a touch screen and other multimedia capabilities such as Web surfing and e-mail.

Samsung Electronics Co. said that profit might increase in the third quarter on higher sales, amid a brightening outlook for the company. The Suwon will have a consolidated operating profit of between 3.9 trillion won (US$3.3 billion) and 4.3 trillion won (US$3.67 billion) for the three months ended Sept. 30. Samsung recorded consolidated operating profit of 1.48 trillion won (US$1.3 billion) in the same period last year. Samsung began issuing earnings estimates in the second quarter this year. The company began releasing consolidated operating profit and sales figures from the first quarter of last year, though does not release a consolidated net profit figure and offered no estimate. Samsung's highest operating profit on a consolidated basis so far was 2.57 trillion won (US$2.2 billion) recorded in the first quarter of 2008.



E-House’s (NYSE:EJ) CEO Xin Zhou has stepped down and became executive chairman of the company and CEO of China Real Estate Information Corporation (NASDAQ:CRIC). Gordon Jianjun Zang was appointed as temporary CEO and has been given a seat on the board.

Baidu (NASDAQ:BIDU) will establish a business-to-consumer (B2C) online shop alliance and has launched a "Morning Star 100" plan to provide B2C search sales solutions to small and medium enterprises (SMEs). Morning Star solutions are based on Baidu's "One Box" search engine and will initially target 100 SMEs.


LTE will give ZTE (OTCPK:ZTCOF) a chance to penetrate more developed markets in the future as the OFDM-based technology does not have much to do with the past. The company has an around 35 percent share of the Chinese 3G market. Its global 3G market share was up over the past year. The market is converging on LTE, although operators are questioning the vendors regarding the deployment of the technology and the resolution for the issue of voice over LTE. China Mobile wished to deploy TD-LTE as soon as possible. The company aims to consolidate TD-LTE and FDD LTE into the same set of network and handset requirements by 2011 or 2012.

The launch of 3G service in China has provided good opportunities for global telecom giants, such as NTT Corp. The Japanese group will tap the China market by cooperating with China Mobile, the largest cell phone carrier in China. NTT group unit NTT Solmare Corp will begin to distribute e-comics in Guangdong and Jiangsu provinces as early as next month with the price set at 0.5 yuan per instalment. NTT Solmare, also partnering Tata Teleservices, has launched an e-comics service in India last month. China is in strongly growing demand for mobile phone content along with the growth in subscribers and the launch of 3G service.

The state-run enterprises in eight of the nine large industries in 2008 have seen their profit fall year on year. The eight industries suffering from sliding profit were the petrochemical, steel, electricity, machine manufacturing, telecommunication, air transportation, shipping, and construction industries. Only the state-run trade companies realized a profit increase. CNPC (OTC:CKKHY), Sinopec (NYSE:SHI) and CNOOC (NYSE:CEO) had losses in 2008 because of the unreasonable pricing mechanism. The company earned 22.6 percent year on year, but their profit was 29.4 percent less than in the previous year. BaoSteel, Wuhan Steel, Baotou Steel and Angang Steel, had profit declined by 37.3 percent year on year due because of the financial crisis, even though the sale revenues climbed by 19.9 percent.

Media, Entertainment and Gaming

· Giant Interactive Group Inc. (NYSE:GA) forecast net revenues of 272 million yuan to 291 million yuan (US$39.9 million to US$42.7 million) for the third quarter of 2009. The company would seek net revenues of US$50 million in July-September 2009. The company is scheduled to unveil its third-quarter financial results in mid November 2009 and launch four online games in the fourth quarter of the year.

· The General Administration of Press and Publication (GAPP) has issued a circular that prohibits foreign companies from investing in and operating online games in China in such forms as sole investment, equity joint venture or non-equity cooperation. Foreign investors are also banned to control and participate in Chinese enterprises' online game operation by indirect means such as establishing related joint venture, contracting agreements or offering technology supports. GAPP and the National Copyright Administration, aiming at further enhancing the pre-approval of online games as well as the approval and control of imported online games, jointly released the circular.


Amoi Electronics Co. Ltd. had a restructuring plan in November hoping to turn a profit this year and avoid getting de-listed on the domestic A-share market. The Shanghai Stock Exchange suspended trading of Amoi stock as the company had its third consecutive year of net losses. Amoi must have profit for 2009 or it will be de-listed from the exchange. Amoi's restructuring efforts will be led by a team of officials from the Xiamen Municipal Government, lawyers from the Chinese firm of King & Wood and employees from Tebon Securities Co. Ltd.

Alternative Energy

Trina Solar Ltd. (NYSE:TSL) has extended its eight year supply agreement signed last year with GCL-Poly Energy Holdings subsidiary Jiangsu Zhongneng Polysilicon Technology Development by another five years to a total of approximately 8,500 MW of solar modules. The agreement also contains a price adjustment clause that offers a market-linked price formula