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Technology
The heart of Asia
 Asia still holds the crown as the world’s centre for cutting-edge tech industries. Of the world’s largest consumer technology firms, the vast majority are based in Asia – and not just in Japan, but also Taiwan, South Korea and India.
Given this backdrop of market dominance, the top companies live and die by the sword of consumer whims. When individuals are in free-spending moods, the tech companies soar high, but when folks tighten their belts and decide to hang on to last year’s model cellphone, or not replace their boxy television with a movie-theatre-sized plasma television that their neighbours across the road can see, than tech companies tend to suffer.
Fortunately for the companies in this industry, Asian technology has been performing reasonably well, if not spectacularly, during the past year, resulting in solid profit for most companies. For example, Samsung Electronics, which maker and sells semiconductors, telecommunication products, home appliances, and digital media products, tops the charts with its 2006 net profit, and outperformed analyst expectations in the first half of 2007. Indeed the firm continues to hire and cultivate top-notch R&D engineers, and boasted in 2006 that slightly more than a quarter of its entire workforce is engaged in research and development activities. As a result, it was able to register more than 2,400 new patents in 2006.
Continuing to innovate helps Samsung Electronics stay on top of consumer demand. And so it’s no surprise that the firm saw the value of its brand take eighth place on Media magazine’s 2007 list of Asia’s top 1,000 brands, with the magazine crediting the company as becoming “a global success, shaking up the old order of category leaders and paving the way for other Korean companies to follow”. That makes it poised to lead both the FA100 and also the region’s technology sector going forward.
Rival LG Electronics posted strong earnings in 2007, in a year it raised money for future development. In May it priced a $500-million deal at 73bp over three-month dollar Libor. The deal came in at the mid-point of initial guidance released earlier this week of 70bp-75bp over mid-swaps. The five-year Reg-S senior FRN, rated BBB-/Baa3, closed with a coupon of 65bp over Libor and a discount margin of 73bp over Libor. It was managed by Deutsche Bank, HSBC, JPMorgan, KDB and Morgan Stanley, and involved a roadshow in Hong Kong, Singapore and London.
Both Samsung and LG Electronics benefit from Fitch’s 2008 rating outlook for the semiconductor industry. Fitch forecasts a stable outlook, mostly driven by the expectation of solid unit growth for PCs and mobile handsets. As the semiconductor industry continues to expand its total available market while pursuing a lower-capital intensive profile, Fitch reckons the industry will experience less volatility and relatively more predictable free cash flow.
Indeed, Fitch’s outlook for Samsung Electronics, LG Electronics and TSMC in 2008 is stable. Of TSCMC the ratings agency writes: “The long-term growth prospects of foundries, TSMC’s ample financial flexibility and consistent free cash flow mitigates Fitch’s concern on its reliance on outsourcing orders, continuous capital spending needs, and operating volatility due to the industry’s cyclical nature”.
Outside of the consumer electronics segment, other FA100 constituents generally performed well. For example, Hynix Semiconductor, a dominant player in the global memory semiconductor industry and one of the very few global memory chip producers equipped with both dynamic random access memory and NAND flash memory solutions, has solidified its ability to raise money. Back in 2001, Hynix’s creditors took control of the company via a debt-for-equity swap after it succumbed to a $10 billion debt burden and severe industry downturn. A 2005 bond offering allowed the company to release itself from a Creditors Restructuring Promotion Act 18 months ahead of schedule.
In June 2007, Hynix priced a Reg-S, 144a 10-year $500 million transaction at par, attracting a total book size of $5.9 billion via boorunners Citi, Credit Suisse, Goldman Sachs, KDB and Merrill Lynch. Market observers had little doubt that the transaction would perform well, noting the issuer had a liquid outstanding curve, which proved how well the company had turned itself around in just a few short years.
Finally, Tata Consultancy Services, which is one of the world’s largest providers of information technology, consulting, services and business-process outsourcing, has been paving the way for software companies in India for some time now. In November, Tata Consultancy became the first Indian company to do an equity deal of size since the regulators clamped down on buying so-called participatory notes, or P-notes, by foreign investors. A $308 million block of India’s Tata Consultancy Services changed hands in November at a tight 2.7% discount to the latest close. The deal, which was done as an accelerated bookbuild transaction, was increased from an original size of about $250 million following strong investor demand. Indeed, the level of demand surprised some observers as the P-note restrictions imposed by the stock market regulator kept hedge funds out of the order book. The demand showed that it’s not just international investors who want a piece of the action when it comes to top notch FA100 companies.
| Ranking by revenue |
| Country |
Company |
(milliion $) |
| SK |
Samsung Electronics |
94,053.53 |
| TW |
Hon Hai Precision |
27,995.10 |
| SK |
LG Electronics |
25,510.80 |
| TW |
Asustek Computer |
17,284.81 |
| TW |
TSMC |
9,792.90 |
| TW |
AU Optronics |
9,043.17 |
| SK |
Hynix Semiconductor |
8,333.43 |
| IN |
Tata Consultancy Services |
4,736.43 |
| IN |
Infosys Technologies |
3,521.67 |
| TW |
UMC |
3,455.64 |
| TW |
Powerchip Semiconductor |
2,842.01 |
| TW |
MediaTek |
1,703.45 |
| |
| Ranking by revenue growth |
| Country |
Company |
|
| TW |
Powerchip Semiconductor |
78.50% |
| IN |
Infosys Technologies |
45.90% |
| TW |
Asustek Computer |
45.50% |
| IN |
Tata Consultancy Services |
40.90% |
| TW |
AU Optronics |
34.80% |
| SK |
Hynix Semiconductor |
31.60% |
| TW |
Hon Hai Precision |
28.30% |
| TW |
TSMC |
19.10% |
| TW |
MediaTek |
14.10% |
| TW |
UMC |
11.70% |
| SK |
Samsung Electronics |
5.90% |
| SK |
LG Electronics |
-2.50% |
| |
| Ranking by net profit |
| Country |
Company |
(million $) |
| SK |
Samsung Electronics |
8,726.58 |
| TW |
TSMC |
3,918.62 |
| SK |
Hynix Semiconductor |
2,215.20 |
| TW |
Hon Hai Precision |
1,846.93 |
| IN |
Tata Consultancy Services |
1,067.84 |
| TW |
UMC |
1,006.39 |
| IN |
Infosys Technologies |
977.44 |
| TW |
Powerchip Semiconductor |
843.13 |
| TW |
MediaTek |
696.64 |
| TW |
Asustek Computer |
593.03 |
| TW |
AU Optronics |
280.87 |
| SK |
LG Electronics |
234.2 |
| |
| Ranking by ROE |
| Country |
Company |
|
| SK |
LG Electronics |
79.10% |
| IN |
Tata Consultancy Services |
56.74% |
| IN |
Infosys Technologies |
42.32% |
| TW |
MediaTek Inc. |
37.55% |
| SK |
Hynix Semiconductor |
27.27% |
| TW |
TSMC |
26.64% |
| TW |
Hon Hai Precision |
26.24% |
| TW |
Powerchip Semiconductor |
26.09% |
| SK |
Samsung Electronics |
18.45% |
| TW |
Asustek Computer |
15.90% |
| TW |
UMC |
11.87% |
| TW |
AU Optronics |
NA |
| |
| Ranking by total points |
| Country |
Top tech company |
|
| IN |
Tata Consultancy Services |
25 |
| TW |
Hon Hai Precision |
24 |
| TW |
TSMC |
23 |
| IN |
Infosys Technologies |
23 |
| SK |
Hynix Semiconductor |
23 |
| SK |
Samsung Electronics |
22 |
| SK |
LG Electronics |
18 |
| TW |
Asustek Computer |
17 |
| TW |
Powerchip Semiconductor |
16 |
| TW |
MediaTek |
11 |
| TW |
AU Optronics |
11 |
| TW |
UMC |
7 |
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