Wireless broadband equipment makers anticipate better performance in the latter half of 2024, as customers gradually reduce excess inventory that has lingered into the early months of the year. Looking ahead, 2025 is expected to be a good year, as the adoption of new standards such as Wi-Fi 7 and DOCSIS 4.0 picks up pace.
The wireless broadband equipment industry was heavily impacted by customer-end inventory adjustments in the second half of 2023, which has continued into the early months of 2024, and recent increases in shipping costs have only added to the pressure.
For example, for the first quarter of 2024, Arcadyan saw revenue reach NT$12.547 billion (US$388 million), while the gross margin stood at 14.82%, a slight improvement of 0.01% from the previous quarter. However, the operating profit margin slid by 0.03% to 6.04% as a combined result of lower revenue and increased shipping costs.
Meanwhile, Zyxel reported a gross margin of 25.46% for the same period, an improvement of 3.9% year-on-year. However, higher operational costs led to a loss of NT$35 million (US$1.08 million) for the quarter.
Although the industry saw revenues dip in the first quarter and a continued gloomy forecast in the second, the expectation is for things to pick up in the second half of 2024. However, shipping costs remain a concern, as numerous factors make prediction difficult.
The network equipment industry covers everything from wired and wireless connections to IoT, optical communications, and data center networks. Looking specifically at wireless broadband equipment, the industry expects good performance in 2025 as inventory adjustments end later this year.
Inventory adjustments in the enterprise market began in mid-2023 and were originally projected to last one year. However, it now appears adjustments will continue into the second half of 2024, as enterprise customers remain hesitant in placing orders.
Industry sources note that corporate expenditures are tied to interest rates, and pressure will ease as the US Federal Reserve gradually lowers interest rates later in the year. Furthermore, Taiwan's economic indicator has turned green for three consecutive months, and forecasts for economic recovery are now turning optimistic.
Meanwhile, in terms of the home and consumer market, the focus is on growth in emerging markets such as India, as demand in highly mature markets such as Europe, the US, and Japan is mostly based on natural replacement cycles. Furthermore, Arcadyan points to high inflation persisting in Europe, and less-than-stellar figures in terms of non-agricultural employment and wages in the US. In contrast, Arcadyan is seeing its business grow in numerous countries across Asia.
Looking ahead, wireless broadband equipment makers hold optimism for the second half of 2024 and especially 2025, as Wi-Fi 7 and DOCSIS 4.0 products begin initial shipments in 2024, and average unit prices will see a boost as shipments of these new products increase. US infrastructure is another potential source of momentum in 2025 and as the US-China trade war is set to continue, Taiwan-based companies can expect to benefit from an influx of orders.
Article translated by Kevin Wang
