Mon, Feb 12, 2018 - Page 15 News List

Faraday Q4 figures show that new plan is working

HIGH-MARGIN HIGHLIGHT:The company last quarter focused on niche products with high entry barriers and long life cycles, which accounted for 46% of revenue

By Chen Cheng-hui  /  Staff reporter

Integrated circuit designer Faraday Technology Corp (智原科技) on Thursday reported a profit for last quarter that trumped market expectations, reflecting the firm’s progress in transforming its business.

Net income for the final quarter of last year rose 30.5 percent year-on-year to NT$41 million (US$1.39 million), with earnings per share (EPS) of NT$0.17, from NT$31 million, or NT$0.12 per share, the company’s financial statement showed.

While fourth-quarter revenue fell 25.8 percent annually to NT$1.13 billion, gross margin increased to a 10-year high of 54.6 percent from 44.2 percent, the company said.

The improvement in margin reflects higher sales in the high-margin silicon intellectual property rights and non-recurring engineering (NRE) segments, compared with the low-margin application-specific integrated circuit (ASIC) design business.

NRE revenue last quarter rose 6 percent quarter-on-quarter to NT$160 million, driven by strong “design wins” for new applications, including artificial intelligence (AI), blockchain, high-performance computing (HPC) and the Internet of Things, as well as 3D sensing and cryptocurrencies, Faraday said in an e-mailed statement.

In the semiconductor industry, a “design win” indicates that a company has designed a chip or product in a way that will lead to large sales volume.

Overall, Faraday said that niche products remained the company’s focus last quarter, accounting for 46 percent of its total revenue.

“Through strategic transformation, the influence of commodity [products] to the company’s operations last year gradually diminished and was superseded by niche products with high entry barrier and a long life cycle,” Faraday said in the statement.

Despite lower revenue contribution from commodity products, the firm’s overall revenue last year grew 1.6 percent to NT$5.34 billion from NT$5.26 billion a year earlier, with EPS rising to NT$3.4 from NT$1.14, it said.

“Faraday’s strategic transformation was in place last year. As a result, the number of new NRE projects increased significantly,”

the company said.

“With a focus on high-value products, Faraday also successfully enhanced revenue quality and its product mix, while moving itself out of the commodity segment,” it added.

The firm’s low-margin ASIC business last quarter accounted for 65.9 percent of its revenue, but Faraday president Steve Wang (王國雍) said the company aims to maintain its gross margin at 50 percent this quarter by doubling revenue contribution from the NRE segment from a year earlier.

However, overall revenue might still decline by a single-digit percentage from last quarter due to seasonal factors, Wang said.

As the ASIC market is expected to grow with booming AI and HPC trends, and the company is working to move toward niche markets, Wang said that Faraday is likely to see its business grow quarter-on-quarter after hitting a trough this quarter, and its gross margin should stay above 50 percent.

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