Investors in Realtek Semiconductor Corp (瑞昱) had a rocky end to last week after the integrated circuit (IC) design firm surprised them with a lower-than-expected operating income for the final quarter of last year due to higher research expenses.
The Hsinchu-based company saw its shares fall 7 percent to NT$83.7 on Friday after it released results for last quarter on Thursday, which showed that higher “tape-out” costs for the 28-nanometer technology in the TV system-on-chip solutions had caused its operating income to drop by nearly 35 percent quarter-on-quarter to NT$464 million (US$15.25 million).
In the semiconductor industry, tape-out refers to the final stage of the chip design cycle before it is sent out for manufacturing.
Prior to Friday, the company’s shares had advanced by nearly 25 percent over the past three months, compared with the broader market’s 3 percent increase over the same period, the Taiwan Stock Exchange’s data show.
Realtek’s business focuses on communication network and PC peripheral ICs.
Its major competitors include MediaTek Inc (聯發科) and MStar Semiconductor Inc (晨星) — the nation’s two leading IC designers — as well as Broadcom Corp and Marvell Technology Group of the US.
Together with non-operating income contributed by the company’s investment in ISSC Technologies Corp (創傑) — a wireless communications IC design house focusing on Bluetooth solutions for mobile accessory products — Realtek reported a consolidated net income of NT$698 million last quarter, down 15.7 percent quarter-on-quarter, but up 44.6 percent year-on-year, company data show.
Earnings per share were NT$1.38 last quarter, lower than the previous quarter’s NT$1.64, while revenue rose 2 percent quarter-on-quarter to NT$7.3 billion and gross margin slightly improved by 0.6 percentage points to 42.9 percent from the prior quarter.
Yuanta Securities Co (元大證券) analyst Chen Chuan-chuan (陳娟娟) said the company’s sales for this quarter would be supported by solid demand from the Chinese tablet market and aggressive supply-chain restocking in the PC market, despite the current quarter traditionally being a low season for Realtek.
“The company’s key growth drivers would remain tablet Wi-Fi ICs and TV IC solutions throughout this year,” Chen said in a client note on Friday.
However, Chen said Realtek’s Wi-Fi IC business for “white-label” tablets may not see strong revenue growth this year compared with the past two years, even though the firm plans to gain more branded tablet business through Intel Corp and NVidia Corp’s chipset platforms.
Moreover, Realtek would continue facing stiff competition from MediaTek, she added.
MediaTek is expected to complete a merger with MStar, the world’s biggest supplier of chips used in flat-panel TVs, on Saturday to consolidate its leadership in both handset and TV IC markets.
As a result, Yuanta forecast Realtek to see annual revenue expand by 2.7 percent to NT$28.94 billion this year from NT$28.18 billion last year, following a 14.5 percent annual increase last year.
Net profit would likely drop by 8.7 percent to NT$2.77 billion, or NT$5.48 per share, from last year’s NT$3.03 billion, or NT$6.01 a share, the brokerage said.