Powertech mulls weaker semiconductor demand

By Kevin Chen  /  Staff reporter

Wed, Aug 01, 2012 - Page 13

Powertech Technology Inc (力成), which provides packaging and testing services for memory chipmakers, said yesterday the debt crisis in Europe and uncertainty in the global economy would weigh on the global semiconductor industry in the second half of the year.

The warning came as the Hukou (湖口), Hsinchu County-based company said its consolidated net income and revenue rose in the second quarter from the first quarter by including those of Greatek Electronics Inc (超豐電子), a small consumer integrated circuit testing and packaging firm Powertech acquired in January.

“In addition to a negative global economic outlook, the popularity of Apple and Samsung products has squeezed global PC demand and thus affected the memorychip industry,” Powertech chairman Tsai Du-kung (蔡篤恭) told a quarterly meeting with analysts via an online video conference at the company’s headquarters.

Tsai said the launch of the Windows 8 operating system had also been delayed until October and the London Olympic Games seemed to have boosted PC sales less than expected, “Therefore, we have a conservative outlook for the second-half of the year.”

One positive piece of news is that global semiconductor integrated design manufacturing (IDM) companies, especially Japanese chipmakers, have continued to phase out in-house manufacturing, which is set to benefit outside foundry and packaging firms, he said.

In the second quarter, Tsai said demand for mobile DRAM was stable and that for NAND flash was supported by strong demand for smart hand-held applications and data storage devices.

However, demand for commodity DRAM did not fare as well in the second quarter as expected and the situation was unlikely to improve in the third quarter, which would likely cause customers to adjust their inventories, which would have a knock-on effect on Powertech’s business, Tsai said.

To enhance its profitability, Tsai said the company was working to reduce its reliance on commodity DRAM business and lower the revenue contribution from Japan's Elpida Memory Inc, one of its major clients.

In the second quarter, about 50 percent of Powertech’s revenue was generated by DRAM business, compared with 64 percent in the first quarter, and that figure is likely to drop to about 40 percent this quarter, he said.

The revenue contribution from Elpida, which Micron Technology Inc announced early last month to acquire for about US$2.5 billion, is likely to drop to below 40 percent this quarter following the recent reports that the Japanese firm is cutting capacity to cope with market condition, he added.

Tsai said the firm would continue to control capital expenditure in conventional technology, but focus on advanced technology investments in areas such as mobile DRAM, NAND flash, copper pillar bump and wafer level packaging.

Powertech has about NT$15 billion (US$500 million) in cash available and has set a capital expenditure level of between NT$6 billion and NT$7 billion for this year, the lowest over the past few years, Tsai said.

The company, whose customers include Elpida and Toshiba Corp as well as Kingston Technology Co of the US, said its consolidated net income for the second quarter was NT$1.32 billion, up 16.58 percent from NT$1.13 billion in the previous quarter, but down 29.04 percent from the same period a year earlier, when it reported net income of NT$1.86 billion.

Earnings per share (EPS) was NT$1.66 in the second quarter, which was up from NT$1.42 in the first three months of the year, but less than NT$2.56 a year earlier, Powertech president Liao Chung-chi (廖忠機) said.

The company’s gross margin of 20.8 percent in the second quarter was slightly lower than the 21.1 percent in the first quarter, but Liao said the 0.3 percent decline was better than the company's guidance of a decline of one percent to two percent.

In the first six months of the year, the company’s net income totaled NT$2.46 billion, or at EPS of NT$3.08. That was compared with NT$3.53 billion, or NT$4.86 per share, during the same period of last year.

Consolidated revenue in the first half totaled NT$20.66 billion, up 3.21 percent year-on-year, while gross margin was down to 20.9 percent from 24.6 percent a year earlier, Liao said.

Share price of Powertech, which has declined 5.93 percent so far this year, ended 0.33 percent higher at NT$60.50 yesterday in Taipei trading, ahead of the company's investors conference.