Concerns over tariffs lead to sales growth reduction for Gudeng
In a recent development, Taiwan-based Gudeng Precision Industrial Co has revised down slightly its revenue forecast for this year, citing potential impacts from US tariffs on customer demand.
The company's chairman, Bill Chiu, stated that while the tariffs will not directly impact their revenue, they believe customers may reduce procurement volume due to the extra costs associated with tariffs. This is a U-turn from the company's previous stance that it would not consider investing in US manufacturing due to the high cost of operation.
Gudeng Precision Industrial Co, the sole extreme ultraviolet pod supplier to Taiwan Semiconductor Manufacturing Co, recently inaugurated a NT$1.6 billion (US$55 million) research and development center in New Taipei City's Tucheng District. However, the tariff rate for Taiwan could potentially be higher than the 25 percent the US imposed on Japan, given Taiwan's smaller economic scale.
Industry context suggests that US tariffs may reduce customer demand and harm revenue growth targets for firms like Gudeng Precision in the semiconductor sector. This can lead to higher product prices for US customers, reduced customer demand if costs rise or supply chains are disrupted, and slower revenue growth or missed targets if sales decline due to tariff-related impacts.
Without direct statements from Gudeng Precision or specific financial disclosures, it is reasonable to infer that US tariffs could have negatively affected their 2021 revenue growth targets due to potential customer demand reduction, as tariffs generally lead to higher prices and market uncertainty in affected sectors.
Despite these challenges, Gudeng is seeing an increase in orders from its major customer, which is scaling up its investment in the US. The company remains optimistic about the semiconductor industry's growth as long as the world's major cloud-service providers continue to spend heavily on artificial intelligence computing capacity.
Negotiations regarding the tariff rate for Taiwan are ongoing. The US has notified 14 countries, including Japan and South Korea, of new tariff rates to take effect on Aug. 1. Taiwan is still negotiating for a tariff rate lower than the 32 percent "reciprocal" tariffs announced by the US in April. No new information about the ongoing negotiations for the tariff rate for Taiwan was provided in this paragraph.
The Arizona state government is coaxing Gudeng and its supply chain partners to build production lines in the US. Gudeng is "evaluating" the feasibility of installing a new production line in the US, due to the request of its major customer to provide real-time component supply and services. However, the company does not have to pay import duties and transportation costs based on the free-on-board agreements it has with its customers.
Foreign exchange volatility would significantly impact the company's second-quarter financial results, as the New Taiwan dollar appreciated 9.88 percent against the US dollar in the quarter. Last year, Gudeng's revenue expanded 29 percent year-on-year to NT$6.54 billion, and revenue growth this year would be supported by new factories launched by customers in Taiwan, China, and South Korea.
In conclusion, while Gudeng Precision Industrial Co has revised down its revenue growth target for this year due to potential US tariffs affecting customer demand and the supply chain, the company remains optimistic about the semiconductor industry's growth and is evaluating the feasibility of installing a new production line in the US to better serve its major customer's needs. The ongoing negotiations for the tariff rate for Taiwan could significantly impact the company's future revenue growth.
Gudeng Precision Industrial Co is considering the feasibility of installing a new production line in the US to accommodate the demands of their major customer, demonstrating their commitment to technology advancement and innovation. The ongoing tariff negotiations between Taiwan and the US have potential implications for the company's revenue growth, as technology sectors like semiconductors could be affected by the tariff's impact on customer demand and market uncertainty.
