Management Discussion and Analysis Print E-mail

FY2023 posed notable challenges for GTB amidst heightened geopolitical tensions and continuation of inventory cycle corrections. Consumer product segments, led by mobile device experience extended stagnation where the growth levels are unlikely to reach levels of the past.

As US-China geopolitical tensions exacerbate, new opportunities were observed rising from the Group’s manufacturing footprint in Penang. Business expansions in form of collaboration and partnerships are in discussion.

Group Financial Review

Notwithstanding the various challenges and headwinds, the Group posted a respectable set of financial results with revenue of RM131.8 million and a net profit of RM26.4 million, which represents a drop of 27% and 42% as compared to RM180.0 million and RM45.5 million respectively in FY2022. Drop of profit margin largely contributed by end of pioneer status for sensor group subsidiary with a total income tax expense of RM7.5 million in FY2023 versus RM5.8 million in FY2022.

Total assets increased from RM326.8 million in FY2022 to RM336.0 million in FY2023 attributed by investment in expansion of manufacturing floor space and capital expenditure for wafer/die preparation’s business segment.

In terms of liquidity, the operations continue to generate positive cash flows and closed the year with cash and cash equivalents of RM210.1 million. Net cash generated from operating activities was RM45.5 million in FY2023 compared to RM61.8 million in FY2022.

Sensor Division

Operating Environment

Consumer market segment remained lacklustre throughout 2023. The demand for our light sensors in mobile applications remain stable as we work with the customer to design new generation solutions. Migration to next generation flagship components saw good execution with no risks/issues observed during start up and mass production phase. On another note, we observe the compounded impact of second source strategy by the end customer in the proliferation of alternative supplies in the True Wireless Stereo (“TWS”) segment. Risk in market share shrinkage for our gesture sensor is anticipated as the TWS product becomes increasingly commoditized into a highly price sensitive product.

Strategic Response

Investment in “Lights Off” and automated operations enabled our operations to be agile and react quickly to changing customer demand. MEMS package qualified and planned for mass production in FY2025. Thin-sensing packages using Au Bump Fanout packages qualification planned for mass production in quarter 4, 2024. Package development and NPI activities are robust with promising outlook.
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Accomplishments and Highlights

On the operations front, the following were the key activities that had been planned and achieved :
  1. Elimination of non-value added processes which include assembly lot traveller elimination, process digitization and Lights off manufacturing.
  2. Dynamic production planning through weekly forecast management and drive equipment Units Per Hour (“UPH”) to minimize operations days in order to achieve facilities cost savings.
  3. Volume linearization planning with customers to maximize economies of scale advantage to improve profitability.

The industry 4.0 implementation project which was completed in FY2023 enabled the company to achieve significant efficiency such as improved manning ratio, output improvement, yield improvement and Live Dashboard monitoring to improve our Overall Equipment Efficiency (“OEE”).

LED and Optoelectronics

Operating Environment

The LED, laser and optoelectronics see a stable outlook. Activities are focused on efficiency to continue to drive profitability from the Group’s matured product portfolio.

Product qualification from high power light modules are on track for mass production in FY2024.

Efforts to expand capacity and customer support in lead frame based packages are promising with first Networking IC package qualified for mass production in FY2024.

Strategic Response

Continued engagements with customers from automotive, memory and logic IC customers see strong interest. ISO team are on track to expand capacity and product portfolio to diversify in the EV required power electronics, memory and logic IC. The group plans to expand geographical reach via partnership in high growth and emerging regions.

Emerging Technology and Verticals

New product pipeline development slowed down for the past two years amidst Covid-19 pandemic related constraints. Intensive efforts to drive business diversification and expansion in automotive and communication verticals have improved our new customers’ pipeline. Reshoring activities triggered by geopolitical tension created a space for Malaysian based semiconductor supply chain.

Strategic Collaboration

The Group’s plans on potential partnership in wafer level technology such as bumping, ReDistribution Layer (“RDL”) and cu pillar complements our in-house capability to support flip-chip packages are on track. Two projects utilizing wafer bumping technologies are in discussion.

Group Outlook and Prospect

As with the cyclical nature of the industry, our business saw a drop mainly by slowdown in semiconductor demand in FY2023, caused inventory oversupply and cautious consumer spending. The anticipated short-term downturn is also the result of a confluence of factors such as rising inflation, geopolitical unrest and lingering effects of the Covid-19 pandemic.

After almost two years of lacklustre performance in the technology sector due to supply overhang as a result of the transition from Covid-19 pandemic to reopening, there are signs of green shoots appearing in terms of stabilizing and slightly increasing demand for product loadings. This adjustment, while painful, was necessary to pave way for a sustainable recovery going forward.

For GTB, we also had to make painful adjustments in FY2023 to restructure our operating base in view of the expired pioneer status in one of the major subsidiaries, including increase in minimum wage and utilities cost. As a result of the various measures that we have taken, together with investments into new equipment to upgrade our capabilities, we are now in a stronger position to take on the many opportunities that are heading our way.