GCS Holdings Inc (GCS, 環宇通訊), which supplies gallium arsenide (GaAs) chips mostly used in telecommunication equipment, yesterday announced that its net profit last quarter grew about fivefold from the previous quarter, supported by a spike in asset gains.
However, last quarter’s operating income shrank by 19.5 percent, falling from NT$91.4 million (US$2.88 million) in the previous quarter to NT$73.53 million. Operating margin fell to 15.3 percent last quarter from 19.7 percent the previous quarter.
GCS said last quarter was gloomy, as telecommunication operators scaled back infrastructure deployment, while its radio frequency GaAs chip customers entered a period of inventory correction.
“We think a slump in capital spending in China’s top-three telecom operators bottomed out in the second quarter,” vice president Simon Yu (余有崇) told a teleconference yesterday. “Demand is rebounding... The third quarter will be better than the second quarter.”
Yu told inventors that 5G will be a new growth driver for the firm, as Chinese telecommunication companies are investing on 5G networks in China, targeting a commercial launch in 2018 or 2020.
“5G is no longer a pipe dream... Services on 5G will require a much larger bandwidth [than those on 4G], given the huge amount of data needed to be processed,” Yu said.
GCS’ 5G technologies are almost ready, he said.
More than half of GCS’s revenue of NT$481 million last quarter came from optical wafers used in telecommunication equipment, such as fiber optics networks, base stations and data centers.
Last quarter, net profit surged to NT$82.56 million, compared with NT$16.9 million in the first quarter, the company said.
That translates into earnings per share of NT$1.39 last quarter, compared with earnings per share of NT$0.29 a quarter earlier.
Non-operating gains soared to NT$20.46 million last quarter, a significant improvement from losses of NT$$72.15 million in the first quarter, the company said.
Gross margin contracted from 50.4 percent to 40.4 percent during the same period.
Commenting on a newly announced partnership with China’s Sanan Optoelectronics Co (三安光電), GCS chief executive officer Brain Ann (安寶信) said the companies plan to form a joint venture to produce advanced GaAs ICs used in consumer electronics such as amplifiers for mobile phones.
The company expects to disclose details of the joint venture at the end of this year, Ann said.
The deal will not require any approvals from regulatory authorities, Ann told investors.
As the joint venture is to focus on making ICs used in consumer electronics, the target market “will not have any links to any products for military use,” Ann said.
On Monday, GCS said it had scrapped a US$226 million merger-and-acquisition deal with Sanan after the US government’s Committee on Foreign Investment in the United States blocked Sanan’s takeover bid due to unspecified concerns.
Shares of GCS fell 1.26 percent to NT$86, rebounding from a decline of 5.86 percent in early trading, after the company canceled the takeover bid from Sanan.
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