While the Taiwanese tech sector is facing “a confluence of headwinds”, both politically and following the transition away from the old guard of tech industrialists, Gala argued there are reasons for investors to be optimistic.
There are a host of companies implementing mass scale automated manufacturing and increasing the usage of industrial automation to manufacture products that dovetail with global trends in the tech sector, he said.
The Taiwan Semiconductor Manufacturing Company (TSMC), for example, is benefiting from the constantly evolving smartphone technology, which increasingly demands more powerful application processors. And because the foundry business is becoming more challenging to enter into due to high capital requirements, TSMC has also benefited from less competition. If the company meets its goal to mass produce chips on seven nanometre nodes in 2018, it will have a foot in the door of the high-end server and data centre market, said Gala.
Tung Thih Electronic (TTE), which produces Adas technology that facilitates automatic parking, collision warning and emergency brake assistance, is also a standout for Gala. TTE is benefitting from the twin forces of increasing penetration of Adas in China and their own entry into the General Motors global supply chain, he noted. “Therefore, we see potential for strong growth as the company benefits from a rapidly expanding product pipeline in a segment of the market with high barriers to entry.”
Gala is also bullish on Advantech, a company that specialises in industrial PCs, and is thus a kind of retro technological disruptor. Because entry barriers into the industry remain high and the rise in smartphones has curbed demand for laptops and tablets, Gala thinks the company is an attractive option for investors.
“Advantech has become ‘future-ready’ through the addition of new capabilities in middleware and software, as well as its ability to deliver bespoke ‘internet of things’ solutions for end customers across industry verticals. This approach demonstrates the ability of the company to move up the value chain and earn high margins,” he said.
Though Taiwanese companies will need to nurture top talent and watch out for competition from Korea and China in order to maintain their success in the region, investors should take note of their “future proofing business models”, Gala stressed.
