Siliconware Precision Industries Co (矽品), one of Taiwan’s leading integrated circuit (IC) packaging and testing service providers, is expected to come under pressure from falling prices and see its profit margin squeezed, an analyst said yesterday.
While Siliconware expects the global IC sector to bottom out in the first quarter of this year, Grand Cathay Securities (大華證券) analyst Mars Hsu (徐振家) said he is not optimistic, as the semiconductor business remains haunted by uncertainty.
“It is likely that Siliconware will suffer from falling product prices this year,” Hsu said. “I expect its gross margin for [this year] will fall below the 16 percent recorded in the fourth quarter of last year on weaker pricing capacity.”
“I remain cautious about the IC business outlook,” he added.
Hsu made the comments after Siliconware reported on Wednesday that its gross margin rose to 16 percent in the fourth quarter from 15.2 percent in the previous quarter on falling operating costs.
During an investor conference, Siliconware said sales in the first quarter are expected to fall by 3 percent to 7 percent from the final quarter of last year, with a recovery from the second quarter.
Last year, Siliconware posted NT$4.84 billion (US$164 million) in net profit, down 14 percent from a year earlier, with earnings per share of NT$1.55, a drop from the NT$1.80 recorded a year earlier. Revenue fell 4.1 percent from a year earlier to NT$61.24 billion last year.
Hsu said the recovery in Siliconware’s gross margins was the result of an upgrade in its technology in copper-based process packaging services last year.
“But with raw material prices on the rise, it will not be easy for the company to maintain such a gross margin this year,” he said. “Unfavorable factors, such as falling product prices and rising raw material costs, are expected to impact the company’s gross margins.”
In addition, Siliconware said it is planning to allocate NT$10.5 billion to capital expenditure this year, compared with the NT$10.98 billion it spent last year, to further improve production technology.
Siliconware shares closed down 2.86 percent at NT$34 on the Taiwan Stock Exchange yesterday, while the TAIEX ended down 1.69 percent.