Win Semiconductors Corp (穩懋), which supplies 3D sensing components for Apple Inc’s iPhones, yesterday slashed its capital spending for this year by 28 percent to slow its capacity expansion, as lagging demand drove down equipment utilization rate to 60 percent last quarter.
Win Semiconductor blamed excessive inventory for sagging demand for products across the board including Wi-Fi, cellular, communications infrastructure and vertical-cavity surface-emitting laser (VCSEL) components.
“We have seen [downward] adjustment in demand in the second quarter. We began to cut back capital spending last quarter and we will continue to drive it down,” company vice president Steven Chen (陳舜平) told an investors’ conference.
This year as a whole, the company plans to spend NT$5 billion to NT$6 billion (US$161.4 million to US$193.6 million) on new manufacturing equipment, rather than its previous estimate of NT$7 billion, Chen said.
The company last quarter boosted its capacity by 10 percent to 32,000 wafers a month, “which will be sufficient to support the company’s growth next year,” Chen said.
Win Semiconductor expects demand for VCSEL components to rebound this quarter after hitting a trough in the third quarter, while demand for components used in Wi-Fi and cellular devices remains weak due to an ongoing inventory correction, Chen said.
As a result, revenue is to increase about 5 percent this quarter from last quarter’s NT$4.07 billion, Chen said.
VCSEL components constituted 13 percent of last quarter’s total revenue, the company said.
The company would be able to stem a slide in its gross margin at a multi-year low of 25.6 percent this quarter, same as last quarter, Chen said.
Win Semiconductor’s VCSEL components were first used in the iPhone X’s 3D sensing module for facial recognition.
The company started making the components a year ago for California-based Lumentum Holdings Inc, to be used in the iPhoneX’s TrueDepth front-facing camera.
The company is optimistic about its VCSEL components as it works with clients to expand the use of 3D-sensing components to other applications, such as cars and data centers, Chen said, dismissing concern over rising competition.
“VCSEL technology is a workable solution, as we have proved. It is difficult to comment whether it will be replaced by rival technology,” Chen said. “We recently heard that some industry players are making similar products. However, not a single product has been shipped to our smartphone client yet.”
In the quarter that ended on Sept. 30, net profit plunged to a six-quarter low of NT$698 million, down 40 percent from NT$1.16 billion a year earlier and down 23 percent from last quarter’s NT$905 million.
Earnings per share last quarter fell to NT$1.7 from NT$2.93 a year earlier and NT$2.16 a quarter earlier.
Gross margin dropped to 25.6 percent from 37.8 percent a year earlier and 32.4 percent in the second quarter, as factory utilization tumbled to 60 percent from 95 percent a year earlier and from 85 percent in the prior quarter.
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