Vanguard International Semiconductor Corp (世界先進), which makes controller chips used in LCD panels, yesterday posted its weakest quarterly net profit in five quarters, as flagging smartphone demand in China and an appreciating local currency ate into profitability.
Net profit contracted 15 percent to NT$1.15 billion (US$38.12 million) in the quarter ending March 31, compared with NT$1.35 billion in the same quarter last year, company data showed.
The company booked a non-operating loss of NT$84 million for last quarter, mostly from a foreign-exchange loss, compared with a non-operating profit of NT$171 million in the previous quarter and NT$36 million a year earlier.
Vanguard expects the impact of a rising currency to escalate this year. A more robust New Taiwan dollar would reduce its gross margin by 2 percentage points this quarter, based on the company’s foreign-exchange assumption of NT$30.2 to the US dollar, up 4 percent from NT$31.4 last quarter, Vanguard said.
Gross margin is forecast to slip to between 29 percent and 31 percent this quarter from last quarter’s 32.1 percent, a five-quarter low, Vanguard said.
Last quarter, a rising NT dollar shaved 0.3 percentage points off its gross margin.
“Unfavorable foreign-exchange rates could cut into the company’s growth in the first and second quarters,” Vanguard vice president D.L. Tseng (曾棟樑) said.
Higher raw wafer prices and increasing labor costs also nibbled at gross margin, the chipmaker said.
Revenue this quarter is forecast to fall by between 0.16 percent and 6.55 percent to the range from NT$5.85 billion to NT$6.25 billion from NT$6.25 billion in the first quarter, Vanguard said.
The revenue projection fell short of most analysts’ expectations. Credit Suisse analyst Randy Abrams was expecting the chipmaker to make NT$6.27 billion this quarter, while others forecast a higher figure of NT$6.83 billion on average, according to Credit Suisse report.
Customer demand for controller chips used in LCD TVs and power management ICs should pick up this quarter from last quarter, while some customers are still digesting inventory, Vanguard chairman Leuh Fang (方略) told investors.
Overall, wafer demand will be flat this quarter compared with last quarter, Fang said.
“We have about two months of order visibility,” Fang said.
Vanguard expects demand to post a marked improvement in the second half, following the seasonal pattern.
“Chinese smartphone companies largely expect demand to return to growth in the second half, with restocking picking up,” Vanguard worldwide sales and planning division vice president Thomas Chang (張東隆) said.
Asked about Vanguard’s progress in tapping the fingerprint sensor market, Chang said customer adoption is slow, but shipments are expected to surge in the fourth quarter.
Fingerprint sensors are forecast to contribute 5 percent to the company’s total revenue at the end of the year, the chipmaker said.
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