Touch-panel maker TPK Holding Co (宸鴻) yesterday forecast that its revenue would shrink by as much as 20 percent this quarter after posting its third straight decline in net profit last quarter amid stagnating demand for high-end smartphones and tablets.
The net profit of one of the major supplier of touch panels for Apple Inc iPads fell 32 percent to NT$3.14 billion (US$104.8 million), or NT$9.02 a share, in the quarter ending on June 30 from NT$4.64 billion in the first quarter, TPK’s financial statement showed. That represents annual growth of 5.37 percent from NT$2.98 billion.
The profit decline exceeded the 16 percent forecast by UBS Securities analyst Arthur Hsieh (謝宗文).
Hsieh on Monday downgraded his rating on TPK stock to “neutral” from “buy,” citing escalating pricing pressure and intensifying competition.
“Demand for high-end smartphones is really weakening … due to growing competition from second-tier Chinese handset brands, which are bringing prices down as there is little difference in the specifications [of the cheaper devices and the high-end ones],” TPK chief financial officer Freddie Liu (劉詩亮) told investors.
“Because of the weak global economy and consumers holding off on purchases ahead of new product launches scheduled for later this year, any pickup in demand will not occur until the fourth quarter instead of the third, as has been the case in the past,” Liu said.
Apple and Google Inc are among the companies set to release new smartphones and tablets later this year, while Microsoft Corp is also planning to roll out an updated version of its Windows 8 operating system.
TPK’s revenue this quarter is expected to slide by between 15 percent and 20 percent, compared with last quarter’s NT$38.29 billion, Liu said.
A drop in that range would bring the firm’s revenue down to between NT$30.63 billion and NT$32.55 billion, marking the lowest level in about two years.
To cope with growing demand for low-range touch panels, TPK is aiming to enter the low-cost sector, saying that it is scheduled to start mass producing low-cost, one-glass-solution panels later this quarter, with production of another type of cheaper panels for smartphones set to begin early next year.
“The price decline is accelerating faster than we expected,” TPK president David Sun (孫大明) told investors.
As demand for tablets is expected to rebound this quarter, Liu said the company estimates that its revenue “will start to rebound in September and will show significant growth in October.”
“Shipments are also expected to recover substantially in the fourth quarter, when the industry enters the peak season,” he added.
Shipments of touch panels for smartphones last quarter plunged 16 percent quarter-on-quarter, while panels for tablets fell 60 percent over the same period, TPK said.
The company’s operating margin is expected to drop to 6 percent in the current quarter from 6.7 percent last quarter, Liu said.
As market demand cools, TPK said it planned to cut its capital spending this year by 16 percent to NT$25 billion, from its previous estimate of NT$30 billion.
TPK shares tumbled 4.41 percent to NT$325, underperforming the TAIEX, which dropped 1.23 percent yesterday.