Wed, Nov 07, 2018 - Page 12 News List

Novatek cautious as net profit jumps

LIMITING FACTORS:Prolonged wafer supply constraints have limited TDDI growth and a patent infringement lawsuit by a rival are expected to slow growth momentum

By Lisa Wang  /  Staff reporter

Novatek Microelectronics Corp (聯詠科技), a supplier of driver ICs for large LCD panels, yesterday said that its net profit rose 18.3 percent year-on-year, driven primarily by inventory buildup demand for TV chips ahead of the year-end holiday season.

However, the growth momentum is expected to slow in the current quarter as the electronics industry enters its slow season, it said.

Revenue is expected to fall to between NT$14.6 billion and NT$15 billion (US$474.3 million and US$487.3 million), down between 7.36 percent and 4.82 percent respectively from last quarter’s NT$15.76 billion, a record high, Novatek president Steven Wang (王守仁) told investors.

He forecast that gross margin would dip to between 29.5 percent and 31 percent, compared with 31.7 percent in the third quarter.

Flagging demand was already reflected in last month’s revenue, which fell 3.85 percent month-on-month to NT$5.24 billion, compared with NT$5.45 billion in September, according to a company filing with the Taiwan Stock Exchange, 23 percent growth from NT$4.26 billion a year earlier.

“Based on our observations, [demand] for TV [system on a chip] will fall significantly, while LCD driver ICs will be flat, or up slightly,” Wang said.

Shipments of a new type of chip that integrates a driver and a controller, known in the industry as a touch controller with display driver integration (TDDI), would be flat this quarter from last quarter, he said.

Prolonged wafer supply constraints have limited TDDI growth, resulting in only 22 percent of smartphones being equipped with a TDDI chip this year, Wang said.

The penetration rate is to climb to more than 30 percent next year if the capacity issue is solved, he said.

Demand for TDDI chips is expected to expand from mid-range smartphones to low-end handsets next year, he added.

In addition to the capacity limitation, Novatek also faces a patent infringement lawsuit filed by local rival FocalTech Systems Co (敦泰電子), which is seeking NT$794.36 million in damages.

“We started developing TDDI in 2009, unveiled our first chip in 2016 and shipped next-generation products this year,” Wang said. “We are determined to protect our intellectual property rights and shareholders’ interests.”

In the quarter ended Sept. 30, Novatek net profit expanded to NT$1.84 billion, compared with NT$1.55 billion in the same period last year, company data showed.

On a quarterly basis, net profit increased 16.22 percent from NT$1.58 billion in the second quarter, the data showed.

Earnings per share last quarter rose to NT$3.02, compared with NT$2.55 a year earlier and NT$2.6 a quarter earlier, the data showed.

Gross margin last quarter improved to 31.17 percent, compared with 29.01 percent a year earlier and 30.21 percent in the second quarter, the data showed.

Novatek shares plunged 3.97 percent to close at NT$133 in Taipei trading yesterday, while FocalTech shares fell 2.31 percent to NT$23.3.

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