TPK Holding Co Ltd (宸鴻) , which supplies touch modules to Apple Inc, yesterday reported record-high quarterly profits, thanks to soaring demand for touch modules used in tablet devices, which delivered a higher margin than those used in mobile phones.
As TPK’s top customer reduces orders this quarter before launching a new-generation product, revenues are expected to fall by 3 to 5 percent this quarter from NT$32.53 billion (US$1.12 billion) in the previous quarter, company financial executive Freddie Liu (劉詩亮) told investors.
“As our key customer cut slightly its third-quarter shipment outlook and an unfavorable macroeconomic environment has weakened consumer confidence, we are conservative about order visibility in the third quarter,” Liu said.
Apple is widely expected to launch its new-generation smartphone, probably called iPhone 5, next month or in October.
“It looks like [the growth momentum] will take a short break in the third quarter and will restart in September,” Liu said.
During the quarter ended June 30, net income grew almost 2.5 times to NT$3.72 billion, compared with NT$1.12 billion earned in the same period last year, according to the company’s financial statement. On a quarterly basis, net profits expanded 50 percent from NT$2.47 billion in the first quarter.
TPK’s second-quarter net profits exceeded the NT$3.25 billion projected by Macquarie and NT$3 billion forecast by JPMorgan. Both Macquarie and JPMorgan rated TPK “outperform.”
Gross margin improved to 19 percent last quarter from 18.9 percent in the first quarter, beating the firm’s expectation of 18 percent, as cost improvement offset price erosion and it had a better product lineup.
This quarter, gross margin would shrink by 1 to 2 percentage points to about 17 or 18 percent from last quarter, reflecting falling demand and a 23 percent increase in operating expenses resulting from rising research and development spending on sampling new touch modules for tablet devices, Liu said.
Revenues from 7-inch touch modules, largely for tablet devices, made up 49 percent of TPK’s total revenue last quarter, from 43 percent in the prior quarter, while touch modules for smartphones dropped to 51 percent from 57 percent, the financial statement showed.
Last quarter, revenues expanded 28 percent quarter-on-quarter, helped by fast-growing end-demand for tablet devices, market share gains and new orders, Liu said.
Liu dismissed recent speculation that TPK was slashing prices to fend off a potential market share loss to local competitors such as Wintek Corp (勝華).
TPK kept its capital spending unchanged at about NT$20 billion for this year, but the company planned to allocate part of the investment on new touch-on-lens products for customers to design more sleek and cost-efficient devices.
TPK is scheduled to ramp up production of the new touch-on-lens products in June next year.