Globetronics sees strong growth Print E-mail

Source: The Star (Dec 15, 2012)

Good strategies, 9-month results contribute to bullishness

WHILE most semiconductor and electronic manufacturing companies in Penang are expecting either a contraction or a flat year due to the global downturn, Globetronics Technology Bhd is one of the few companies that are projecting strong growth compared with 2011.

Following its nine-month results, it is not surprising that Globetronics is confident of such strong performance.

For the nine months ended Sept 30, the group posted RM30.1mil in net profit on the back of RM204.7mil revenue, compared with RM207mil and RM21.7mil achieved in the same period last year.

In its filing with Bursa Malaysia, Globetronics said it was optimistic of achieving better performance and growth in the 2012 financial year.


Globetronics' success can be attributed to the execution of business strategies which led to the launch of high-value light-emitting diodes (LEDs) and quartz-based timing devices widely used in the growing illumination, smart phone, and tablet sectors.

The engines of growth are the group's high-brightness (HB) LED modules, quartz-based timing devices, and sensor chips.

According to Gartner, a US-based information technology research and advisory company, worldwide sales of smartphones and tablets are expected to rise to 1.2 billion units in 2013 from the projected 821 million units this year.

Global smartphone sales for the third quarter of 2012 rose 46.9% to 169.2 million compared with the corresponding period last year.

Tablet sales worldwide is expected to increase 98% to 118.9 million units this year from 60 million units a year ago.

Globetronics chief executive officer Heng Huck Lee says the group's HB LED modules and quartz-based timing devices are the group's biggest contributor to the revenue and margin for 2012.

"We invested over RM200mil to develop these products over a five-year period and the strategy is now bearing fruit.

"The quartz-based timing devices are used in smart phones and tablets to support timing and GPS functions.

"There are usually more than two such quartz-based timing devices in a smart phone and a tablet," he says.

Heng says the group has just entered into the production of sensor chips that are used in smart phones and tablets for enhancing the talk time performance.

"This is for a European customer. We are collaborating with the customer, who is also the patent owner, to design and develop the chip so that they could be mass-produced.

"This product should contribute to our top-line and bottom-line in the next financial year," he says.


For the LED business, which contributes 35% of the group's revenue, Heng says Globetronics is now using innovative US LED technology to produce HB LED modules with single bin or single group of white light that could be fully utilised in the general lighting market.

"This is a unique technology that converts violet light to a single bin of white light.

"The conventional approach produces white light for LED modules from the conversion of blue light, which ends up producing different bins of white light that may have limited usage or not acceptable for the general lighting industry.

"Together with our US partner, we are confident of performing well in the US general lighting market, which has an estimated value of about US$4bil this year."

Heng adds that Globetronics is also working with a multi-national corporation to produce multi-colour programmable LEDs for the stage and display lighting markets in Europe .

"This product is now in the final stages of sampling and is expected to be out next quarter.

"We have started design and development of the LED components for smart phones and tablets, we target to start mass production next year," Heng says.

The main challenges to the global LED industry are price erosion and excess capacity especially for the mid-power and low-power segment, according to Heng.

According to the Taipei-based DIGITIMES Research February 2012 report, the global high-brightness LED industry will see year-on-year growth of 13.4% in 2012, with the value of output rising to US$10.1bil.

However, the HB LED industry will not be able to return to the high levels of growth seen in 2010, as there is a huge drop in metal organic chemical vapour deposition equipment, which are used for manufacturing LEDs, the report said.

In 2010, the industry grew an impressive 67% to US$10.2bil from US$6.1bil in 2009, according to a TechEye report.

On the group's expenditure for next year, Globetronics will spend about RM35mil to RM50mil for its LED lighting products, quartz-based timing devices, and sensor chips, according to Heng.

On the group's logic chips serving the personal computer industry, Heng says the demand for logic chips has softened, following a worldwide trend.

The logic chip business generates 10% of the group's business.

According to SEMI's latest book-to-bill report, North America-based manufacturers of semiconductor equipment posted US$743.2mil in orders worldwide in October 2012 (three-month average basis) and a book-to-bill ratio of 0.75.

The bookings figure is 18.6% lower than the revised September 2012 level of US$912.8mil, and is 19.8% lower than the October 2011 order level of US$926.8mil.

A book-to-bill ratio of above one indicates that more orders are received than filled, and hence a strong market where demand outpaces supply.

Similarly, a book-to-bill ratio of below one indicates weaker demand.