Reuters reported that Musk told some company executives he was cutting the number of Tesla employees because he had a “super bad feeling” about the economy. It’s hard for all electronic components manufacturers to weather the global semiconductor downturn but we tend toward a “pretty bad feeling” rather than “a super bad”. HANA’s core earnings are likely to drop YoY for the next two quarters. We recommend adopting a wait-and-see stance.
2Q22—bottom of the year?
For electronic components firms, we need to watch the sales trends for end-product markets, such as PCs, cloud products, smartphones, and automobiles. According to HANA’s 1Q22 results, the biggest proportion of its revenue came from telecom (30%), followed by auto (19%), industrial (16%), opto (10%), RFID (9%), computer (8%), consumer (6%) and medical (2%). Demand for RFID (RFID tire tags and RFID inlay) should remain strong but demand for other products is at risk, we believe. Apart from demand slowdowns in many end-product markets, HANA’s 2Q22 performance will be hit by the supply disruption (Ukraine/Russia war and the lockdown in China). Moreover, higher raw material costs will put pressure on its GM in 2Q22. It will be difficult to immediately negotiate for selling price increases.