臺灣電子制造業(yè)：這是成本壓力不斷上升的一年

1、Research Pauline 886 2 27156323 HYPERLINK mailto:pauline.chen AngelaPan886 227156352 HYPERLINK mailto:angela.pan WilliamLi886 2 27156363 HYPERLINK mailto:william.li 10June2019 AsiaPacific/Taiwan EquityResearchElectronics ManufacturingServicesTaiwan EMS/IPC SectorASSUMING COVERAGEASSUMING COVERAGEA y

2、ear of rising cost pressureFigure 1: Assuming coverage on Hon Hai / Pegatron / AdvantechCompanyNew RatingNew TPP/E (X)P/B (X)2019202020192020Hon HaiN70.7PegatronN550.8AdvantechO29525.4Source: Company data, Credit Suisse estimatesAssuming coverage on Hon Hai with NEUTRAL rating/NT$77 TP (from Neutral

3、/NT$73), Pegatron with NEUTRAL rating/NT$55 TP (from Outperform/NT$60), and Advantech with OUTPERFORM rating/NT$295 TP (fromOutperform/NT$275).EMS to suffer from production relocation. We expect EMS companies to speed up their production site diversification to non-China areas,toavoid any uncertaint

4、y in shipments amid rising trade tensions. We note that in 2010 when Hon Hai initiated its production relocation plan from coastal China to inland China, its EBIT per headcount saw 17%/10% YoY decline in 2010/2011. This, together with uncertainties of rising demand, could lead to heavier pricing pre

5、ssure and earnings downside risks for thesector.Rising vertical integration and IIoT to mitigate the cost headwinds. We believe Hon Hai and Pegatron will continue to focus on componentsverticalintegration and industrial internet of things (IIoT) to mitigate the impact of rising costs. Relatively, Ho

6、n Hai is more ahead of Pegatron in these two areas, and the stock is also trading at lower valuation (on both P/E and P/B) with higher net cash position. However, we note that it takes time to see if Hon Hais chairman succession plan (from one strong leader, Terry Gou, to five newly elected board me

7、mbers) could still lead the aircraft carrier as efficiently as it used to be. We believe this trend should favour the IPC sector, in which Advantech arguably offers one of the best quality, given its extended product offerings and strengthening software integration capability in variousareas.OF THIS

8、 THE OF to do in its As a be have a of of this Focus chartsFigure 2: EMS/ODMglobal footprintFigure 3: China no longer cheaper on min.wagesCompanyChinaTaiwanUSIndiaMexicoOthersHonHai80-85%CompanyChinaTaiwanUSIndiaMexicoOthersPegatron90-95%0-5%Wistron80-90%0-5%0-5%5-10%0-5%Inventec80-85%0-5%0-5%10-15%

9、Wistron80-90%0-5%0-5%5-10%0-5%Quanta90%5%0-5%0-5%Compal90-95%0-5%Quanta90%5%0-5%0-5%6005004003002001000(US$)MexicoCzechChina BrazilIndonesia Vietnam2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Source: Company data, CreditSuisseestimatesSource:CEICFigure 4: Hon Hai seeing labour costcomingdo

10、wn2008201020122014201635% labour cost as of sales labour cost as of sales(%)25%20%15%10%-5%-10%Net profit contribution from Casetek and Kinsus20142015201620172018Source:CompanydataSource: CompanydataFigure 6: Prefer IPC overEMS(EBIT/headcount)Figure 7: AdvantechIIoT a key earningdriver0.0(NT$mn)Hon

11、HaiPegatronAdvantech25%20%15%10%(OPM)IIoTNCGEIoTACGGlobal serviceService IoT(sales YoY)2008 2009 2010 2011 2012 2013 2014 2015 2016 2017-30%-20%-10%0%10%20%30%40%50%IIoTNCGEIoTACGGlobal serviceService IoT(sales YoY)Source:CompanydataSource: CompanydataA year of rising cost pressureWe assume coverage

12、 on Hon Hai with NEUTRAL rating/NT$77 TP (from Neutral/NT$73), Pegatron with NEUTRAL rating/NT$55 TP (from Outperform/NT$60), and Advantech with OUTPERFORM rating/NT$295 TP (from Outperform/NT$275), respectively.We to speed up their site to non-China to any in amid rising trade together with of coul

13、d lead to heavier and earnings risks for We Hon Hai Pegatron continue to focus on and internet of things (IIoT) to the of Hon is more of in these two and the isalsotradingatalower(onbothP/EandP/B)withcashnote that it takes to see if Hais plan (from one Terry Gou, to five newly board could lead the a

14、ircraft as as it used to We believe trend favour the IPC in one of the best given its extended offerings software integration in Production relocation adding costsFigure 8: EMS/ODM global footprintCompanyChinaTaiwanUSIndiaMexicoOthersHon Hai80%0-5%0-5%0-5%0-5%0-5%Pegatron90-95%0-5%0-5%Inventec80-85%

15、0-5%0-5%10-15%0-5%Wistron80-90%0-5%0-5%5-10%0-5%Compal90-95%0-5%5%Quanta90%5%0-5%0-5%Source: Company data, Credit Suisse estimatesWe to speed up their site to non-China to any uncertainty in amid trade In the past few HonHaihasmademoretoinvestoutsideofChina,including itsWisconsincouldseeUS$10bnandha

16、s its lines in (mainly for and is now inotherSEAincludingVietnamandWeinwhen Hai initiated its production plan from to inland its EBIT saw YoY decline in This, together with of lead to for theHon Hai has a relatively more diversified global footprint than PegatronHon Hai has a more diversified global

17、 footprint than Pegatron (Figures 1 and 2), including the US, Brazil, Europe, India and South East Asia. According to both companies 2017 CSR reports (2018 CSR not available), Hon Hai claims that it has two strategic R&D clusters (one in Greater China and another in US), three design and manufacturi

18、ng zones across Asia, the US and Europe, and more than 200 subsidiaries and branch offices in Asia, the US and Europe. However, Pegatron states that its major DMS (Design, Manufacturing and Service) is mainly located in China, Mexico, and Czech Republic, with service centres in the US, Japan, Brazil

19、, Singapore and Korea (for service). While we note that some of Hon Hais proposed investments have not been materialised, it at least shows more ambition on diversifying its globalfootprint.Figure 9: Hon Hais global footprintSource: Company dataFigure 10: Hon Hais committed investment vs actual spen

20、dingYearPlaceCommitmentUpdated status2010Meoli, TaiwanNT$10 bn, for solar cell & moduleShifting to Kunshan, China2011BrazilUS$12 bn, 100k jobs, for iPhone and iPadfive plants in totalTwo plants to be out of production in 2015 employee based in Brasil 10K2012IndonesiaUS$1 bn, 1 mn jobs, for smartphon

21、e productionNot in production2013Pennsylvania, USUS$40 mn, 500 jobs, for high-tech R&DNot in production2015Maharashtra, IndiaUS$5 bn, 1 mn jobs, for manufacturingNot in production2017Wisconsin, USUS$10 bn, 13k jobs, for panel productionhiring 0.1% negative earningsimpact.Figure 15: Hon Hais componen

22、t offerings (2018)Company nameVertical integrationRevenue(NT$ bn)GM(%)EPS(NT$)Net Income(NT$ mn)Ownership(%)Profit toHonhai(NT$mn)Profitcontribution %Sharp CorporationDisplaymodule,TVs,smarthomedevices,cameramodules646.817.2%33.320,327.941.7%8,484.86.6%Foxconn Industrial InternetCommunication networ

23、k equipment, cloud service equipment,precision tools and industrial robots1,894.18.6%1.196,793.784.8%82,081.163.6%FIH Mobile LimitedFIT Hon TengHandset parts and assembly, Nokia mobile phone Manufacturing backplane connectors, memory cards, socketsand other electronic devices453.2121.6-0.6%17.7%-0.1

24、0.0(26,015.6)7,100.862.0%77.0%(16,129.6)5,467.7-12.5%4.2%Foxconn TechnologyNB/smartphone casing, Game console assembly142.19.5%6.59,150.829.5%2,697.72.1%Zhen Ding TechnologyFlexible PCB design/SMT117.922.1%10.511,536.538.0%4,381.63.4%Ennoconn CorporationIndustrial PC ODM/EMS69.022.1%14.52,868.939.4%

25、1,130.60.9%ShuSin TechnologyPA/Optical transceiver module packaging4.518.8%2.8290.660.7%176.30.1%Asia Pacific TelecomTelecommunication services14.69.4%-0.8(3,267.7)19.7%(643.7)-0.5%Pan InternationalCable, Connector, PCB SMT27.28.7%2.31,348.726.5%357.50.3%CyberTAN TechnologyBroadband and wireless net

26、working devices8.66.4%0.5166.611.0%18.30.0%Advanced Opto TechnologyLED packaging, LED module4.66.0%-2.7(386.8)12.0%(46.4)0.0%G-Tech OptoelectronicsOptoelectronics glass processing service4.22.0%-0.6(124.5)22.0%(27.4)0.0%Foxsemicon Integrated TechSemiconductor and TFT-LCD equipment manufacturing9.324

27、.8%14.11,162.715.0%174.40.1%General Interface SolutionIntegrated touch display solutions128.48.6%11.83,980.222.5%897.10.7%Innolux CoporationTFT-LCD panel solution provider279.49.6%0.22,222.827.7%615.30.5%Sanying Precision IndustryPhotoelectricCamera module-(259.6)100%(259.6)-0.2%CircuTech Internatio

28、nalIP-based HD video surveillance solutions1.25.0%-2.4(56.2)51%(28.4)0.0%Fitipower Integrated TechnologyPower management IC; LCD driver IC8.920.1%2.4346.128.0%96.90.1%Maxnerva TechSmart manufacturing and IoT solutions, and I.T. services1.338.6%0.015.510.9%0.60.0%ZY TechOptical lens molding tool1.240

29、.4%2.3140.127.0%37.80.0%E SonMechanical parts for the consuming electrical products10.314.0%2.1370.325.7%95.20.1%Ways TechPlastic surface decorating techniques1.115.1%-1.0(90.7)9%(8.2)0.0%UVATSputtering equipment and coating OEM service0.930.8%3.1115.610%11.90.0%Usun TechnologyAutomated system/machi

30、ne integration/solution provider1.923.4%-0.6(50.6)15.3%(7.7)0.0%Galaxy Digital holdingDigital asset management and blockchain technology0.00.0%-41.3(1,105.5)7.0%(77.4)-0.1%ChinaHarmonyNewenergyAutoDeals exclusively in China luxury and ultra-luxury vehicles48.57.1%2.13,115.78.4%262.70.2%Sub-total69.6

31、%; Note: FII, FIH, and FIT are consolidated into Hon Hai; Source: Company data, Credit Suisse estimatesPegatron: a late comer with accelerating investments in vertical integration hurting marginsPegatron states that its vertical integration and strategic investments include motherboard, substrate, f

32、lexible PCB, casing, WiFi module, LED, large-screen monitor, camera module, fibre optic and connectors. However, the aggregate net profit contribution to Pegatron was negative in 2018, mainly hurt by Casetek (casing) and Fuyang (flexible PCB).Figure 16: Pegatrons component offerings (2018)Companynam

33、eVerticalintegrationRevenueGMEPSNetIncomeOwnership (%) Profit toPegatronProfit(NT$bn)(%)(NT$)(NT$mn)(NT$mn)contribution%toCasetekmetalcasingforNB,tablet&smartphone30.54.6%-4.13-1,702.059.4%-1,011.2-9.1%Kinsussubstrate,SLP,andPCBforNB,wearable&smartphone23.722.7%0.78349.538.6%134.81.2%AzurewaveWiFi/B

34、luetooth module, Digitalimagemodule6.910.4%-0.81-118.432.8%-38.8-0.3%ASRockNB/server/IPCmotherboardSMT10.222.3%4.91592.955.9%331.33.0%FuyangFlexiblePCBdesigning/SMT-279.489.1%-249.0-2.2%LumensPTZcamera,Projector194.255.2%107.21.0%CanonDigital camera, mobile phone/handsetcameramodule7.6 8.5% -1.64-46

35、3.011.7%-54.3Fresco Logic USB-C/PD, superspeed transport, I/O aggrerationIC-8.2%-Lightel Technologies Fiber optic related products/componentsandservices-7.7%-SpeedtechCommunication, computer, automotive andconsumerconnec5.1 20.5%1168.54.8%8.0ValensSemiconductoAudioVisualandautomotiveultra-high-defin

36、itionmultimediaI-4.2%-Sub-total-772.0-6.9%Note: Casetek, Kinsus, Azurewave, ASROCK, Fuyang, and Lumens are consolidated into Pegatron; Source: Company data, Credit Suisse estimatesRising focus on Industrial Internet of Things (IIoT)Hon Hai Well positioned for smart manufacturing but will first focus

37、 on internal adoption and cost restructuringWe believe Foxconn group is in a unique position in smart manufacturing, leveraging (1) Hon Hais 40+years of manufacturing experience, (2) FIIs open IIoT platform and leading position in networking equipment and (3) Ennoconn groups diversified presence in

38、IPC, sensing devices and software system. The continued investment and development of smart manufacturing did not reflect in FIIs revenue, as the group turned to internal adoption, refocusing its resource to improve its cost structure and staying competitive amid rising demand uncertainty.Cost benef

39、its slowly come throughFII stated that several internal operations benefit from smart manufacturing efforts, such as yield rate improvement, life extension of tools (cutting tools), longer maintenance cycle of tools (nozzle parts) and enhanced production efficiency. FII further claimed that its awar

40、ded lighthouse factory (Shenzhen) demonstrated smart manufacturing capability including self-maintenance and real time monitoring, which has enhanced production efficiency by 30%, reduced inventory turnover by 15% and reduced labour by 88%. Overall Hon Hai delivered 0.2 pp YoY OPM improvement in 201

41、8, despite cost headwinds from components/material prices, labour cost pressure, tightened environmental cost and unfavourable FX. Its labour cost as of sales also went down to 6.3% of sales in 2018, vs. 7.0%+ level in previous five years. FII also showed labour cost decrease (down 6% YoY) on top of

42、 double-digit revenue YoYgrowth.Figure 17: Hon Hais labour cost burden slowly comes downFigure 18: Hon Hais labour cost per headcount seeing decelerating growth from201520082010201220142016 labour cost as of sales labour cost as of sales(%)0.3500.3000.2500.2000.1500.1000.0500.000Labor costs per head

43、count (LHS)YoY (RHS)201020112012201320142015201630%25%20%15%10%5%0%-5%-10%Source:CompanydataSource: CompanydataFoxconns physical manufacturing + industrial internetFoxconn group has its diversified roots in different layers of smart manufacturing, including its core layer which is also the smart sen

44、sing layer (data collection and monitor, information mining layer), the cloud network layer (including edge computing), platform layer (the BEACON platform) and application layer (various applications including customer relationship management, supply chain management, quality control, security, env

45、ironmental management, etc.). Please see our HYPERLINK /s/V7d7cz4AF-Z7Yy FII initiation for more details on Foxconn groups smart manufacturing buildup.IT serviceEdge ComputingGatewayData collection and monitorIT serviceEdge ComputingGatewayData collection and monitorEdgeIAASPAASIndustrial APP storeS

46、AASCRMSupply chainmgmtProductionmfgMoney flowand logistic mgmtDesign andmfg dataEquipmentdataQualitydataEnvironmentdataSafety dataMaintenancemgmtResourcemgmtEquipmentmgmtRepairment andmaintenance mgmtSource: Company data, Credit Suisse estimatesNetwork upgrade to infuse more potential into smart man

47、ufacturingThe upgrade network (to 5G) should push forward more advanced technology, such as 8K imaging which is crucial for smart computer vision, and for performing applications such as intelligent quality tracking and maintenance management. Foxconn group illustrated how 8K resolution helps manufa

48、cturers to detect issues in subcomponents, citing illustrations with high quality images of nuzzle and a more precise cutting quality depth. FII showcased its end-to-end industrial vision solution at 2019 Computex, demonstrating how different smart cameras (equipped with AI chip) perform different d

49、etection/recognition tasks through the combination of edge and cloud computing. According to the IHS market, manufacturing will see the largest share of 5G-enabled economic activity in 2035 at US$3.4 tn or 28% of the overall TAM.In the long term, Foxconn group will continue to work on selling its sm

50、art manufacturing services, with several government entities and big corporates in talks. It also sees growth opportunities beyond the electronic industry, extending to agriculture, medical, and automotive, with new products launching, such as Fog AI, MicroCloud and VaaS.Pegatron automation adoption

51、 focused on labour cost reductionPegatron stated that it started its automation investments 5-6 years ago, mainly focusing on reducing labour cost burden. The company has a dedicated team of production automation, and its internal target is to reduce labour force by 10-15% per year.According to the

52、company, a higher automation level (=50%) is seen in SMT, packaging and testing, but a relatively lower level in assembly lines, given form factor changes in every one year or two. Mature product lines, such as game console, have higher automation level, and it faces more difficulties in implementin

53、g automation on higher- seasonality/higher-volatility smartphone production lines.Figure 20: Pegatron not seeing falling labour cost burden overtimeFigure 21: Pegatrons labour cost per headcount also showing yearlyvolatility2009 2010 2011 2012 2013 2014 2015 2016 2017 2018labour cost as of sales %0.

54、700labour cost as of sales %0.6000.5000.4000.3000.2000.1000.000Labor costs per headcount (LHS)YoY (RHS)201020112012201320142015201650%40%30%20%10%0%-10%-20%Source:CompanydataSource: CompanydataAdvantech well positioned in IoT (Internet of Things)We believe Advantech is well positioned to capture the

55、 growth opportunity in IoT (Internet of Things), which is powered by multiple technologies with fragmented solutions. Amongst all, IIoT (industrial internet of things) has been a solid driver for Advantech in past few years, with 12% CAGR in past five years (vs. corporate CAGR of 8%), and adding to

56、its profitability with above-corporate average margin (45-50% vs. corporate 38-40%).Three-phase strategyAdvantech has a solid stance in the intelligent and automated embedded system, including bare bones systems, industrial PC/servers, networking equipment, gateways and IoT sensors, claiming a leadi

57、ng market share of 32% in IPC, and this forms Phase I of building the IoT ecosystem. Moving to Phase II, it launched its SRP (System Ready Packages) solutions last November, which combines embedded hardware and its WISE PaaS (or IIoT Open-API Alliance) platform. In Phase III, Advantech will focus on

58、 co- creation of more-SRP solutions with partners/system integrator to further optimiseSRP.Figure 22: Industrial AIoT value chainFigure 23: Advantech moving towards higher value- add areas in the new business modelSource: Company data, Credit Suisse estimatesSource: Company data, Credit Suisse estim

59、atesStrengthening vertical integration to widen the leadershipAdvantech believes its differentiation with competitors is its vertical integration of edge devices, network equipment, cloud platform, and software, which provides flexibility and customisation to smoothen the incorporation of smart manu

60、facturing and further accelerates the IIoT deployment.Figure 24: Advantechs recent M&AInvestmentDescriptionStrategyInvestment size StakeITTS is a TW based consultant/system integrator for smart manufacturing; More local support on WISE-PaaS and SRP solution, mainly focusing on5/8/2019for Greater Chi