Taiwan-based network equipment assemblers have voiced cautious optimism regarding the second half of this year, due to ongoing inventory adjustments by telecom channel and data center customers, according to industry players.
Industry players estimate telecom channel customer inventory adjustments will finish by the end of this year. Adjustments by data center customers are ongoing. The impact on network switch pull-in momentum will need to be monitored.
Arcadyan Technology reported a 5.8% sequential and 6.8% on-year increase in July revenue to NT$4.45 billion (US$140.83 million), a new record for the period. Accumulated revenue for the first seven months of 2023 totaled NT$27.63 billion, up 8.9% on year and a new high for the period.
Arcadyan noted that the industry is healthy this year, highlighting the broadband infrastructure upgrade push by various governments. As such, the company saw its gross margin increase in the second quarter and expects to maintain single-digit growth in the third quarter, with gross margin reaching roughly 14%, give or take a point, while operating margin reaches around 6%.
Gemtek Technology's revenue in the first half of 2023 reached NT$14.08 billion, up 20.67% on year. The gross margin came in at 10.73%, an increase of 14.76% over the same period in 2022. Net profit before tax increased 57.75% on year to NT$452 million, while net profit after tax increased 62.05% on year to NT$350 million.
Gemtek's second-quarter gross margin reached 12.4%, attributed to the disposal of its Changshu plant, which significantly reduced operating costs, as well as steady shipments of high gross margin products. Gemtek expects product specification upgrades will drive new product shipments in the second half. Coupled with business model adjustments, Gemtek believes gross margin in the second half could increase compared with the first half.
Gemtek is actively embracing the "direct supply" business model, shifting from an indirect supply model to telecom operators, which is expected to drive up gross margin. However, Gemtek pointed out that inventory adjustments in the US market, which accounts for 40% of its revenue, may affect revenue performance in the second half of the year. Still, the impact on profit is expected to be low, buoyed by the improvement in gross margin.
Sercomm chairman James Wang noted during a recent earnings call that shipments of Wi-Fi 6E products to North American customers were still being transported via air in the second quarter, which he does not understand since other markets are already undergoing corrections. Wang estimates corrections will start in third-quarter 2023 and last three or four quarters, finishing by the first or second quarter of 2024.
Sercomm expects growth in Europe and India will be able to help relieve the pressure from inventory corrections in North America. In the second half, Sercomm anticipates demand in the third quarter will be lower and then recover in the fourth. Overall performance in the second half is still expected to grow compared with second-half 2022, but more obvious growth is not expected until 2024.
Accton Technology saw its July revenue soar to NT$7.51 billion, attributed to continued capacity optimization and its Vietnam plant entering mass production. Accumulated revenue from the first seven months of the year increased 14.66% on year to NT$47.32 billion. Accton anticipates quarter by quarter growth in the second half.
Accton has yet to see any significant impact on network switch momentum as a result of inventory corrections by data center customers and weak pull-ins for general purpose servers. Industry sources credit this to Accton's diverse customer base.
Article translated by Eifeh Strom
