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04-09-2019, 09:46 AM
I don't think Micro Mechanics have pricing power. I don't think Micro Mechanics is able to raise prices without affecting underlying demand. In fact, I think most if not all semiconductor companies have no pricing power (to varying degrees). That would explain why prices for electronics has been constantly decreasing. This is just different from See's Candies/Altria/Microsoft, which have pricing power.
MM's outstanding margins should be due to operational efficiencies, cost control and business strategies.
Quotes from MM's 2Q2018 quarterly report:
"While growing the Group’s top line and the value we create for our customers remains a key priority, we have also been working tirelessly to enhance our manufacturing processes, productivity and cost structure by focusing on various strategies, such as 24/7Machining, IT automation and department integration. Hence, in spite of ongoing selling price and cost pressures, our GP margin in 2Q18 improved slightly to 56.1% from 55.4% in 2Q17."
"We believe the semiconductor industry’s robust growth during 2017 may indicate a prolonged period of stronger industry growth as chips become increasingly used in nearly every aspect of modern life. While this would be a welcome change from the sluggish industry conditions witnessed during 2016, the semiconductor industry is being increasingly driven by price-sensitive consumer applications. As such, we expect to see continued price and cycle-time pressures from our customers. Together with rising costs and a shortage of skilled workers, the operating environment for the Group is expected to remain challenging."
MM's outstanding margins should be due to operational efficiencies, cost control and business strategies.
Quotes from MM's 2Q2018 quarterly report:
"While growing the Group’s top line and the value we create for our customers remains a key priority, we have also been working tirelessly to enhance our manufacturing processes, productivity and cost structure by focusing on various strategies, such as 24/7Machining, IT automation and department integration. Hence, in spite of ongoing selling price and cost pressures, our GP margin in 2Q18 improved slightly to 56.1% from 55.4% in 2Q17."
"We believe the semiconductor industry’s robust growth during 2017 may indicate a prolonged period of stronger industry growth as chips become increasingly used in nearly every aspect of modern life. While this would be a welcome change from the sluggish industry conditions witnessed during 2016, the semiconductor industry is being increasingly driven by price-sensitive consumer applications. As such, we expect to see continued price and cycle-time pressures from our customers. Together with rising costs and a shortage of skilled workers, the operating environment for the Group is expected to remain challenging."