Overview
In 2023, Nan Ya Plastics Corp. (NPC) recorded a consolidated revenue of NT$259.75 billion, marking a 26.9% decrease from NT$355.18 billion in 2022; and a consolidated pre-tax income of NT$9.13 billion, declining by 80.8% compared to NT$47.55 billion in 2022.
During 2023, there was a significant increase in global inflation, with countries rapidly raising interest rates, leading to a sharp decline in demand. However, the industry added new production capacity, leading to a continuous rise in market supply, and prompting manufacturers to prioritize inventory clearance. This conservative market environment had posed challenges, which was reflected in the overall performance.
The four major product categories of NPC operations are plastic processing, chemicals, polyesters, and electronic materials.
In terms of plastic processing,
NPC continued to engage in the R&D of innovative applications, raw materials, and eco-friendly products with special specifications in order to increase the sales ratio of differentiated and high-value products and expand into healthcare, e-sports, and the automotive industry. We also carried out capacity consolidation, introduced automatic monitoring equipment to enhance machine productivity, and expanded into high-end and potential emerging markets by promoting e-commerce and online marketing.
Moreover, we took advantage of our decentralized production sites at home and abroad in Taiwan, China, the U.S., and Vietnam. By coordinating production and marketing operations among our plants promptly, we provided satisfactory service and experience to our customers. As a result of our ongoing efforts, we consistently maintain stable profitability in plastic processing products.
In terms of chemical products,
in line with vertical integration and division of labor in the Sixth Naphtha Cracking Plant in Mailiao, NPC’s products, including ethylene glycol (EG), Bisphenol-A (BPA), 1,4-butylene glycol (1,4BG), plasticizers, phthalic anhydride (PA), 2-ethylhexanol (2EH), and epoxy resin (EPOXY), have been vertically integrated into upstream and downstream industries to form a complete supply chain that supports the development of downstream industries such as polyester, electronics, and plastic processing, respectively.
In 2023, real estate issues in mainland China remained unresolved. After the lifting of pandemic-related restriction, the momentum of recovery was not as expected. Market demand declined, and with the continuous expansion of new production capacity, the oversupply spilled over to overseas regions.
The market became highly competitive, leading to an overall decline in profitability for chemical products. Moving forward, we will persistently optimize our processes and bolster our sales in markets beyond mainland China to enhance revenue and profitability.
The polyester products had experienced adverse effects due to the decline in end-consumer demand,
primarily attributed to inflation and interest rate hikes. Brand owners and downstream customers had been consistently adapting by adjusting their inventory levels accordingly.Additionally, intense competition from mainland Chinese counterparts, who were aggressively lowering prices to secure orders, had resulted in lower-than-anticipated sales and an overall decline in profits.
With the rise of global environmental awareness, there are unlimited opportunities for recycling and the circular economy. The demand for polyester products primarily depends on the recycling of PET bottles. The Company has proactively pursued the development of polyester items aimed at minimizing carbon emissions and conserving water resources. This includes innovations like naturally colored silk, textile recycling, and highly elastic single-material recyclable silk. Additionally, we focused on broadening the scope of application for polyester fiber products, striving for continued performance growth.
As for electronic materials,
there was sluggish demand for consumer electronics in 2023. Despite this, materials for automotive, communication, and server applications remained stable. Additionally, the supply chain proactively implemented measures to minimize inventory, and the United States heightened its technology control over mainland China. Consequently, customers restricted orders to urgent needs, resulting in a decline in both sales volume and prices across various products compared to 2022. This dual decrease in revenue and profit followed suit.
The electronic materials industry is poised for exciting opportunities on the horizon.
- The advancement from 5G to 6G in communication technology will enable the progress of related materials to continue.
- The advancement of electric and autonomous driving in automotive electronics requires the use of materials capable of withstanding higher voltages.
- Support from low-loss materials is also necessary for large-scale language model training in the field of AI.
- In advanced semiconductor packaging, thinner circuits, and dielectric layers necessitate the use of new materials.
In addition to wind power construction and related applications, this will drive the improvement of material specifications and the demand for upstream raw materials. The Company will take advantage of full vertical integration both upstream and downstream. We will combine internal research and development with external collaborations to develop high-performance materials, including copper foil substrates, resins, fiberglass fabrics, and copper foils. In addition, we have established a dedicated market expansion department to expand our presence in Taiwan and mainland China, as well as new locations in Southeast Asia. This will accelerate product validation and implementation, ultimately leading to increased sales and profits.
Nan Ya Printed Circuit Board Corp. (Nan Ya PCB) a reinvestment company of NPC, has been cultivating the high-end IC substrate market for a long time and has been working with customers to launch next-generation CPU, GPU, Netcom, automotive, AI, and HPC (high-performance computing) application substrates. However, due to the decline in demand for electronic products such as remote business and home entertainment products, manufacturers rapidly reduced orders to clear excess inventories. Intense competition for orders among industry peers resulted in lower sales and profits in 2023 compared to 2022.
Under the development of advanced technologies such as chiplet packaging and heterogeneous chip integration, the demand for high-end IC substrates continues to grow. In response to future development trends, Nan Ya PCB has actively strengthened its R&D capabilities and expanded its production capacity to meet market demand. In addition, we have worked closely with our customers to jointly develop application IC substrates for cloud server processors, high-end AI chips, and AI personal computer processors. In addition, we have consistently integrated artificial intelligence and big data into our production management to improve the company’s operational performance.
Nan Ya Technology Corp., another reinvested company of NPC, is dedicated to developing, manufacturing, and selling DRAM products. In the first half of 2023, major global manufacturers increased their production cuts to address the supply-demand imbalance. In the second half of the year, demand for related products increased due to the popularity of AI applications. The price of DRAM stopped declining and began to rise gradually in the fourth quarter. To counter the sluggish industry outlook, Nan Ya Technology Corp. continued to adjust its product portfolio and implemented various cost improvement initiatives to improve profitability.
DRAM is an essential component in the smartification of electronic products. Major applications include servers, data centers, personal computers, smartphones, and consumer electronics. It is expected that the recovery of DRAM will be stimulated after the regular inventory adjustment of the end market in 2024. In addition to maintaining sales of current products, efforts will be made to strengthen independent development capabilities to enhance long-term competitiveness.
Looking ahead to 2024, global interest rates remain high. The increasing competition between the United States and China in the technology sector, the ongoing war between Russia and Ukraine, and the eruption of the Israeli-Palestinian conflicts have created an unpredictable international situation. In addition, petrochemical production capacity in mainland China has been expanded in recent years, leading to an oversupply and intense competition among industry peers for contracts. As a result, business operations remain challenging.
In addition, trends such as technological innovation, diverse applications of AI, increasing electrification of automobiles, and integration of smart functions into end devices are driving the demand for advanced electronic materials, including high-frequency and high-speed materials. Companies can only make profits by having advanced technologies and products.
Sustainability issues have become an integral part of modern business management. Faced with significant changes in the business environment, companies must proactively adapt and respond. The Company has formed an internal “Sustainable Operation and Development Department” to coordinate resources across the organization and promote business transformation and sustainable development. The Department’s main objectives are as follows:
- Increase the ratio of high-value and differentiated products while concurrently expanding into new applications and markets.
- Develop new businesses, products, and technologies to deepen the Company’s industrial layout.
- Apply digital technology, refine AI, and advance digital transformation to achieve intelligent operations.
- Expand the range of environmentally friendly products, demonstrate commitment to energy conservation and carbon reduction, and actively promote the circular economy.
Under the aforementioned operating strategy, we aim to capture market development trends by focusing on core areas such as high-speed communications, innovative AI applications, new energy vehicles, and automotive electronic substrates. We intend to pioneer materials in the technology industry and develop health-related medical materials, as well as recycling and green technology products. This initiative will drive the development of a series of upstream and downstream industries.
In the future, we will actively improve and upgrade our equipment. We will continuously incorporate artificial intelligence into our equipment and processes, integrate various digital data, and develop a digital management platform. This will optimize the control of production process conditions, improve quality, reduce raw material and energy consumption, achieve intelligent management, and increase NPC’s operating efficiency.
The Company has always been committed to protecting the environment by implementing the circular economy. We prioritize water and energy conservation, waste reduction, and recycling activities. By adopting multiple cycles of reuse, our goal is to minimize resource consumption and maximize economic benefits. Furthermore, we have allocated resources to R&D, concentrating on the creation of environmentally friendly high-value green products. Concurrently, we’ve forged cross-industry alliances to establish a robust recycling system. This strategic approach enables us to effectively meet our objectives of waste reduction, reuse, and resource utilization.
We are also actively implementing strategies to achieve "Carbon Neutrality by 2050". These strategies include "low-carbon energy transition," "energy conservation and circular economy," "increasing renewable energy usage," "application of carbon capture technology," etc. We have already worked with ITIR and TUV Rheinland to verify the carbon footprint of 13 main products. We are also proactively addressing the opportunities and challenges presented by climate change and improving operational resilience through improved product design, process technology, and supply chain management.
In terms of new expansions and investments, the bisphenol-A (BPA) at Ningbo Plant in China has been operational since 2023. This year, several investments will also be completed successively, including polyester release film, ABF substrates, and blood bag and leukocyte reduction filter system for medical use at Shulin Plant, Taiwan, and the flexible PVC sheeting at Texas Plant in the United States. These investments are expected to generate an annual output value of over NT$12 billion.
In the upcoming years, the Company will continue with various expansion projects, including the plant solar systems installation in Taiwan, and the expansion of copper foil at Huizhou Plant in China. Moving forward, we will adapt to industry trends and international economic and trade conditions, closely monitoring changes in the supply chain. We will make timely and appropriate investments in new capacity expansion to drive sustainable growth.