Local printed circuit board (PCB) makers are planning alternative water sources — such as using recycled water, preparing water storage facilities or hiring water trucks to transport water from remote areas — in anticipation of more stringent water rationing as the nation’s most severe water shortage in 56 years worsens.
PCB production in Taiwan is somewhat clustered in the Taoyuan region, where the water shortage alert was on Friday raised from “yellow” to “orange,” resulting in reduced water supplies for households and industrial users.
“PCB suppliers’ backup water storage can provide three days of water supply. In other words, four straight days of water outages would cause production disruptions,” Yuanta Securities Investment Consulting Co (元大投顧) analysts said in a note on Friday.
Photo: Tsai Ching-hua, Taipei Times
The analysts said the water shortage is affecting PCB makers’ production in the second quarter, while the outlook for the third quarter remains uncertain.
The manufacturers include Nan Ya Printed Circuit Board Corp (南亞電路板), Unimicron Technology Corp (欣興電子), Kinsus Interconnect Technology Corp (景碩科技), Chin-Poon Industrial Co (敬鵬工業), Allied Circuit Co (博智電子), Flexium Interconnect Inc (台郡科技) and Taiflex Scientific Co (台虹科技).
On Friday night, there were heavy rains, but the catchment area at the Shihmen Reservoir (石門水庫) in Taoyuan received only 6.4mm of rain and the reservoir — which supplies water to Taoyuan and the western part of New Taipei City — was at a mere 9.81 percent of capacity as of noon on Saturday, Water Resources Agency data showed.
The agency said that the water shortage alert in Taoyuan would remain “orange,” but Taoyuan Mayor Cheng Wen-tsan (鄭文燦) has said that the alert would change from “orange” to “red” at the end of this month or early next month if there is not a large amount of rain.
Even though New Taipei City’s Feitsui Reservoir (翡翠水庫) could still support water demand in Taoyuan and Hsinchu until July, Yuanta said that it would reassess its intake and decide whether to continue supplying water if there is a less than ideal amount of rain during the plum rain season.
“Industrial water supply costs NT$12 per tonne, while water delivered by water tank costs NT$400 per tonne. Based on our estimates, water accounts for 0.2 percent of PCB suppliers’ production costs,” Yuanta analysts said. “If water shortages become more serious, Taiwan-based PCB plants will need to deliver water using water tanks, increasing production costs.”
PCB makers would also need to watch for changes in foreign-exchange rates and raw material prices regarding their earnings outlook, the analysts said.
The appreciation of Asian currencies and raw material price hikes stemming from the US Federal Reserve’s quantitative easing have put pressure on the PCB sector’s earnings since the second half of last year, and major manufacturers have raised average selling prices from last month to reflect part of the cost increases, the analysts said.
“Persistent raw material price hikes are likely to continue to suppress PCB makers’ earnings in the second quarter of this year,” they said.
However, given higher consumer prices and improving employment in the US, the Fed might begin to consider gradually restricting capital injections and assess potential interest hikes in the second half of this year, they said.
“PCB players’ cost pressure will likely ease if Asian currencies depreciate against the US dollar and raw material prices also fall amid rising interest rates,” they added.
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