Pegatron Corp (和碩), Apple Inc’s second-largest iPhone assembler, yesterday reported a nearly 40 percent annual drop in net income for last quarter, dragged down by weak iPhone sales and declining contributions from its components subsidiaries.
Net profit last quarter was NT$3.72 billion (US$127.4 million), compared with NT$5.86 billion a year ago, marking the company’s lowest record over the corresponding period in the past five years, company data showed.
“The ramp-up of a major communication product started later than planned and the peak season for the product ended earlier than expected. Pegatron’s expanded production only ran on full capacity for one or two months,” chief financial officer Charles Lin (林秋炭) told a teleconference.
A low utilization rate, surging costs on idle personnel and capacity expansion expenses affected Pegatron’s margin performance last quarter, Lin said.
Gross margin fell 1.55 percentage points annually to 3.2 percent during the October-to-December quarter, the lowest since the fourth quarter of 2012. Operating margin shrank 1.3 percentage points to 1.2 percent, the weakest since the third quarter in 2013.
The sluggish earnings performance of component subsidiaries, such as Casetek Holding Ltd (鎧勝) and Kinsus Interconnect Technology Corp (景碩), also weighed on Pegatron’s margins, Lin said.
“The impact from the components subsidiaries accounted for between 30 and 40 percent of Pegatron’s margin decline last quarter,” Lin said.
Pegatron this year will focus on responding quickly to rapid changes in the market and improving its subsidiaries’ profitability, he said.
Pegatron chief executive officer S.J. Liao (廖賜政) said that management remains optimistic about the firm’s communication business this year, as its main smartphone client is estimated to add new functions for its new product.
“We think the new functions and applications will stimulate demand for the device,” Liao said.
Pegatron’s consumer electronics segment, which contributed 13 percent to its revenue of NT$377.56 billion last quarter, is estimated to see better performance this year, supported by growing orders for game-related products and “smart” home devices, Liao said.
The company is prepared to spend between US$350 million and US$400 million in capital expenditure this year, with more than US$200 million of that focusing on production expansion for communication and consumer electronics products, Lin said.
The company’s net income plunged 24.05 percent annually to NT$14.68 billion last year, or NT$5.66 per share.
Pegatron’s board also approved a proposal to distribute a cash dividend of NT$4 per share.
That translates into a payout ratio of 70.67 percent, higher than the previous year’s 66.66 percent, and a yield of 5.26 percent based on its closing price of NT$76 yesterday.
RECORD BUDGET: TSMC does plan to raise its proposed capital expenditure a lot, and could benefit if Intel outsources more of its production to foundries, analysts said Intel Corp’s earnings conference call on Thursday is expected to clarify the US semiconductor giant’s outsourcing production plans, which would be crucial regarding Taiwan Semiconductor Manufacturing Co’s (TSMC, 台積電) performance, analysts said. “TSMC stands to benefit if Intel outsources more of its fabrication to foundries,” SinoPac Securities Investment Service Corp (永豐投顧) analysts said in a note on Friday. Yuanta Securities Investment Consulting Co (元大投顧) was more cautious, saying that Intel’s contribution initially would be limited, but its outsourcing plans would still highlight TSMC’s leadership in technology, it added. “Intel will continue to manufacture server or high-end central processing units [CPUs], which have higher
MediaTek Inc (聯發科) yesterday announced it would give incentive bonuses totaling NT$1.7 billion (US$59.7 million) to its employees and those at the firm’s major subsidiaries, after the smartphone chip supplier’s revenue hit US$10 billion last year. This is the biggest incentive bonus the Hsinchu-based handset chip designer has ever distributed in its 23-year history. About 17,000 full-time employees of MediaTek and five of its subsidiaries, including Richtek Technology Corp (立錡科技) and Airoha Technology Corp (絡達科技), would receive a “red envelope” of NT$100,000 each, the company said. “Surpassing US$10 billion is just the beginning. We will continue to [grow] on this basis,” MediaTek
TO SPUR REVENUE: The contract chipmaker expects its profit to grow 15 percent this year, outpacing the foundry industry’s projected advance of about 10 percent Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday raised its projected capital spending for this year by 62 percent, a new high, in an attempt to satisfy customer demand for advanced technologies in the production of central processing units, high-performance-computing (HPC) devices and 5G applications. After investing US$17.24 billion last year, TSMC this year plans to spend US$25 billion to US$28 billion on manufacturing equipment and new facilities, including a fab in the US. About 80 percent of the budget would be allocated for developing advanced technologies including 3, 5 and 7-nanometer technologies, the company said. The larger-than-expected capital spending prompted speculation
Norway’s oil and gas reserves have made it one of the world’s wealthiest countries, but its dreams for deep-sea discovery now center on something different. This time, Oslo is looking for a leading role in mining copper, zinc and other metals found on the seabed and in hot demand in green technologies. The country could license companies for deep-sea mining as early as 2023, the Norwegian Ministry of Petroleum and Energy said, potentially placing it among the first countries to harvest seabed metals for electric vehicle batteries, wind turbines and solar farms. However, that could also place it on the front line of