On January 14, Pegatron Corporation, the leading contract manufacturer, held an investor conference. The company released the financial reports for 2022Q4 and the entire 2022, as well as voiced its outlook for 2023. Pegatron believes that business prospects will continue to be affected by macro-environmental factors in 2023, with many variables beyond its control at play here. The revenue in 2023 is expected to be about the same as the previous year or decline slightly. As for the highly anticipated automotive electronics market, Pegatron aims to increase its share of the revenue from the current single-digit percentage range to over 10% within two years.
Pegatron's consolidated revenue for the entire 2022 was NT$1.32 trillion, which was 4.5% higher than the same period of the year earlier. The consolidated revenue for 2022Q4 was NT$357.25 billion, marking a 1.2% increase from the previous quarter but a 21% decrease compared to the same period of the year earlier.
Pegatron reported that the end-market demand for the three major product lines was weaker compared to the same period in 2022, resulting in a double-digit decline. However, thanks to the launch of new product models in Q4, customers restocked much faster. This has offset the decline in revenue from information technology products and consumer electronics, which is caused by the slowdown in end-market demand and seasonal factors. As a result, there was still slight growth compared to the previous quarter.
In terms of the structure of the product portfolio, communication technology products accounted for 65% of total revenue, with a 17% QoQ increase and a 19% YoY decrease. Information technology products revenue marked a QoQ decrease of 24% and a YoY decrease of 42%. Consumer electronics revenue decreased 27% QoQ and 29% YoY.
Regarding prospects for Pegatron's three major product lines, the company stated that it initially estimated that shipment volume for information technology products, mainly PCs, would be 10-15% lower than the previous quarter. However, the overall decline was much more gradual than the previous estimate, thanks to the new product launches and inventory clearance. Consequently, the expected shipment volume for Q2 would remain roughly in line with the previous quarter. The shipment is expected to take off in Q3.
Johnson Deng, Pegatron's Co-CEO, further explained that the inventory level is currently decreasing and will return to normal in Q2. However, as the macro-environmental factors are beyond the company's control, Pegatron is cautious about its outlook. Therefore it is expected that the overall performance of the PC business for 2023 will be roughly the same as or slightly lower than in 2022.
In terms of consumer products, Pegatron still maintains its less-than-rosy view, as Q1 is an off-season for the industry. However, there are new product launches in Q2. Its performance is expected to remain about the same or possibly better. As for communication technology products, shipments in January were good. While the overall Q1 is expected to decrease slightly compared to the same period in previous years, network communication technology products are expected to slightly rebound in Q2, while mobile phone shipments are expected to remain roughly the same.
In terms of the further development of network communication technology products, Pegatron continues to develop the market for the up-and-coming 5G O-RAN technology. Gary Cheng, Pegatron's other co-CEO, added that Pegatron has laid out its strategy early for the business opportunities brought by this new technology, whereas the rest of the industry is still developing new business models for 5G O-RAN. Many industry leaders now have also jointly launched relevant applications. In addition to developing new business models, Pegatron expected that there will also be small shipments in 2023, which, despite its modest contribution to overall revenue, can help Pegatron establish its brand awareness, which drives the integration of server and end-use communication technology products.
Overall, Pegatron is optimistic about 5G O-RAN's ability to drive more product development. This new technology and the automotive market will be the company's focus of development in the upcoming years.
As for the electric vehicle market that has been actively developed in recent years, Pegatron pointed out that they still focus more on automotive electronic components. However, Pegatron has also been expanding its share in the mechanical component and power component market. Therefore, other than the automotive electronic components, the company will also integrate mechanical and other components in the hopes of developing new products. Automotive electronic components account for only a small percentage of total revenue. Nevertheless, Pegatron aims to increase its share of overall revenue to 10% or more within two years.
Pegatron's stakeholders are quite concerned about the company's plan for production capacity. Pegatron emphasized the fact that its production capacity will follow its customers. Wherever the customers go, Pegatron's support will follow. However, different product lines have different needs. They are also closely related to the overall supply chain. Pegatron has been actively setting up its production bases all over the globe, which are operating in North America, Southeast Asia, China, India, and other regions.
Regarding overall business in 2023, Pegatron stated that it would basically be in line with 2022. The main challenge still lies in the macro-environment: the global economic downturn, unfavorable foreign exchange rates, interest rates, and the recent Silicon Valley Bank (SVB) incident. All of these factors are beyond the control of individual companies. As a result, Pegatron is cautious about 2023. It plans to strengthen its capabilities through diversified development, such as strengthening R&D, smart manufacturing, and lean operations so that better capacity utilization and profitability could be achieved.
Article translated by Emma Hsu
