KUALA LUMPUR (Jan 10): The ongoing US-China trade war has affected KESM Industries Bhd's volume but the company believes the impact is temporary.

The independent semiconductor 'burn-in and test' service provider said its end customers had tightened up purchases and cautiously controlled their inventory in view of the trade war concern.

"The trade war had somewhat affected our production volume in testing and burning, which has declined around 15% over the last six months," KESM executive chairman and chief executive officer Samuel Lim Syn Soo told reporters after the group's annual general meeting today.

Such external factors would explain the impact to the group's financial performance too, which saw its first quarter net profit fell 77% on lower demand.

Net profit for the first quarter ended Oct 31, 2018 (1QFY19) plunged to RM2.64 million compared to RM11.38 million in the previous year.

Revenue also fell 10% to RM81.56 million from RM90.71 million previously.

Nevertheless, Lim is optimistic that the group will see a better bottom line in the quarters ahead, as it focuses more on enhancing growth prospects of its automotive segment, which contributes about 90% to its total revenue.

"I don't expect this (trade war effect) to continue because KESM's growth is not dependent on PC (personal computer) market, phones or appliances. It is dependent on the automotive market.

"The automotive market, which has seen a rise in autonomous cars, has brought in new technologies and therefore the need for testing, and this is the main business we are in. So we look forward to continued growth. Our fundamentals are good," said Lim.

He added that declining sales of Apple products in China does not pose a significant impact to the group.

At the midday break today, KESM rose 1.56% or 13 sen to RM8.47 with 11,900 shares done.