Wed, Oct 30, 2019 - Page 12 News List

Faraday Technology Q3 net profit surges 160.71%

OPTIMISTIC:As China develops its own chip manufacturing capabilities and reduces dependence on US firms, Faraday’s orders have increased, president Steve Wang said

By Lisa Wang  /  Staff reporter

Local chip designer Faraday Technology Corp (智原科技) yesterday posted a net profit of NT$146 million (US$4.78 million) for last quarter, a quarter-on-quarter increase of 160.71 percent thanks to strong demand for application-specific ICs used in smart meters, networking products and 5G small cells.

On an annual basis, net profit surged 67.82 percent from NT$87 million, while earnings per share rose to NT$0.59 from NT$0.22 a quarter earlier and NT$0.35 a year earlier.

The Hsinchu-based company expects revenue this quarter to fall by a single-digit percentage from last quarter’s NT$1.59 billion, the highest level in 13 quarters.

However, it still expects to register annual growth in revenue, Faraday chief financial officer Grace Tseng (曾雯如) said.

Gross margin is to remain at about 50 percent this quarter, compared with 50.4 percent last quarter, Tseng said, attributing the slight decline to non-recurring engineering (NRE) services on 14-nanometer technology.

The company is collaborating with Samsung Electronics Co to provide 14-nanometer chips.

Faraday president Steve Wang (王國雍) said that he is optimistic about next year, as customers are accelerating the pace of the design to the mass-production process.

In addition, the company is benefiting from the US-China trade dispute, Wang said.

As China builds its own chip manufacturing capabilities and reduces its dependence on US firms, the company has seen an increase in orders, he said.

Most chips designed in the past one or two years are entering the final stages of verification and are to enter mass production next year, he added.

Faraday charges royalty fees for the chips it designs for clients, mostly after they enter mass production. That royalty income is the firm’s biggest source of revenue, providing 59 percent last quarter.

“Growth momentum from smart meters is to carry into next year. Chinese customers are showing strong demand,” Wang said.

Faraday can leverage foundry capacity in China from its parent company, United Microelectronics Corp (UMC, 聯電), Wang added.

In addition, the company expects chips for artificial intelligence Internet of Things apps and enterprise solid-state drives to start contributing next year, he added.

Revenue from the NRE and intellectual property rights businesses would hit a new high this year, extending record growth in the third quarter, Wang said.

NRE contributed 26 percent of the company’s revenue last quarter, Faraday said, adding that most NRE services utilize relatively advanced 40-nanometer and 28-nanometer technologies.

The intellectual property rights business accounted for 14.6 percent of third-quarter revenue, it said.

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