Thu, Nov 07, 2019 - Page 12 News List

Novatek profit slips as margins decline

OPTIMISM:The company expects increased shipments of driver ICs for OLED panels and that fast-growing demand for 5G smartphones would stimulate sales of TDDI

By Lisa Wang  /  Staff reporter

Novatek Microelectronics Corp (聯詠), which makes driver ICs for LCD panels, yesterday reported that net profit last quarter declined 4.53 percent sequentially as falling prices cut into margins.

Net income dropped to NT$2.03 billion (US$66.78 million) during the three-month that ended in September, compared with NT$2.56 billion in the second quarter.

However, on an annual basis, net profit grew 10.4 percent from NT$2.27 billion a year earlier.

Revenue climbed to a record NT$16.6 billion in the third quarter, with 68 percent coming from driver ICs and 32 percent from system-on-a-chip (SoC) for TVs and other consumer electronics.

Gross margin drifted lower to 31.07 percent last quarter from 32.05 percent in the prior quarter and 31.17 percent a year ago.

However, the company is upbeat on prospects, saying it expects its expansion into driver ICs for OLED panels to bear fruit, with shipments growing significantly in the first half of next year, in step with its Chinese clients.

“We are optimistic about OLED [driver IC shipments] next year as customers overcome a [major] learning curve and are to enter mass production,” Novatek president Steven Wang (王守仁) told an investors’ conference in Taipei.

Wang’s optimism is also built on the fast-growing demand for 5G smartphones in China, which should stimulate demand for advanced touch controllers with display driver integration (TDDI).

Novatek expects TDDI penetration to rise to 50 percent next year, as more feature phones are upgraded to smartphones, Wang said.

The company started supplying a small volume of driver ICs for OLED panels in the second quarter, he said.

This quarter, revenue is expected to drop between 1.78 and 4.8 percent sequentially to between NT$15.8 billion and NT$16.3 billion, due to a seasonal slowdown.

Gross margin is forecast to range from 30 to 32 percent, Wang said.

Novatek expects demand for SoCs, which offers higher gross margins than driver ICs, to cool down this quarter following the end of the peak season.

Demand for driver ICs used in mobile phone panels would continue to grow slightly as most phone makers are preparing to roll out new 5G models later this quarter, the company said.

The weakness in driver ICs used in TV panels is likely to carry into this quarter, it said.

Wang is pinning his hopes on the year-end holiday shopping spree to prop up television demand, stemming a price decline and lending support to panel prices in the first quarter next year.

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