Fri, Jul 25, 2014 - Page 13 News List

TPK profit falls on weak demand for small tablets

By Lisa Wang  /  Staff reporter

TPK Holdings Co (宸鴻) yesterday posted a slump in operating profits for last quarter due to weak demand for smaller tablets and the poor yield rate of its new technology.

It said the unresolved technology problem and delays in new product launches by clients would negatively affect its profitability this quarter.

TPK, which supplies touch panels for Apple Inc’s iPads, said its operating profits dropped to NT$98 million (US$3.26 million) from NT$290 million in the first quarter. Operating profit margin fell 0.3 percent from 1.1 percent during the same period.

However, the firm’s net profit for last quarter rose to NT$323 million, or NT$0.98 per share, from NT$129 million, or NT$0.39 per share, in the previous quarter, due to the NT$585 million in tax refunds and investment benefits it received from China in the quarter, compared with a gain of NT$139 million in the previous quarter.

“In the third quarter, our operating profit margin should break even,” company chief financial officer Freddie Liu (劉詩亮) told investors, blaming the “unsatisfactory” yield rate of TPK’s unprofitable touch-on-lens technology behind for the lackluster outlook.

Revenue is expected to be flat or to grow 5 percent sequentially this quarter from last quarter’s NT$30.7 billion, Liu said.

“We do not expect a significant rebound until September,” he said.

“Our clients are very conservative about demand for new products, which has fallen short of our expectations and puts our operating profit under pressure,” TPK president Tom Sun (孫大明) said.

As clients have postponed sales of new tablets and wearable devices, it weighs on the company’s costs and profit margin this quarter as potential factory output is underutilized, Sun said.

Touch panels used in tablets were the company’s second-largest revenue source last quarter, making up at least 27 percent of last quarter’s revenue, according to TPK.

To deal with with customer’s sales of new products, TPK has hired 10,000 new workers in China and added new capacity, Sun said. He expects the impact to diminish next quarter along with customers’ growth in shipments.

Sun, however, did not specify when the company would be able to improve the TOL technology’s yield rate to the expected level.

The company is betting on the new technology to make high-definition touch panels for smartphones, tablets and notebook computers as it faces a loss in iPhone orders from Apple Inc, which favors in-cell technology from other touch panel suppliers.

The company yesterday dismissed speculation that it has secured new orders from Apple for the iPhone 6.

"We do not have the orders," Liu told investors on the sideline of yesterday’s meeting, adding that the company does not have the in-cell technology.

Apple is the top client of TPK, accounting for 38 percent of the company’s overall revenue last quarter, down from 49 percent in the first quarter.

TPK shares plummeted 5.73 percent to NT$238.5 yesterday.

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