Shares in touch-panel controller chip maker Elan Microelectronics Corp (義隆電子) have rebounded by nearly 27 percent from the low levels in mid-November last year, as investors expect new projects in the pipeline to prop up the company’s outlook this year.
However, analysts said the company’s microcontroller units (MCU) used in various wearable devices and fingerprint sensors could provide more upside going forward, following a disappointing demand for touchscreen notebooks in the second half last year.
Elan shares closed at NT$52 on Friday. They have risen 26.52 percent from as low as NT$41.1 on Nov. 21, according to Taiwan Stock Exchange’s data.
On Monday last week, the Hsinchu-based company reported consolidated sales of NT$1.87 billion (US$61.9 million) for last quarter, down 1.2 percent quarter-on-quarter and 2 percent year-on-year, but better than the company’s guidance of a sequential decline of between 3 percent and 6 percent.
For the whole of last year, total sales increased 5.8 percent to NT$7.79 billion from 2012, the company said in a statement.
For this year, Elan said it would focus on smartphone projects to drive its revenue growth, as the average selling price and gross profit margin are better than other projects.
Apart from expanding the brands mobile phones in Japan and South Korea, Elan said it would not miss the rapid take-off of the Chinese smartphone market as it has teamed up with several Taiwanese panelmakers to penetrate the market there through collaboration on the on-cell projected capacitive touch technology.
“In 2014, the multiparty cooperation of end customers, ODM makers as well as panel houses will drive the smartphone revenue growth,” Elan said in the statement.
Credit Suisse Securities’ Taipei branch analyst Jerry Su (蘇厚合) said Elan’s working with multiple touch sensor suppliers of different touch technologies would begin bear fruit later this quarter from the ramp-up production of new Chromebook models by Samsung Electronics Co, Asustek Computer Inc (華碩), Acer Inc (宏碁), Lenovo Group Ltd (聯想) and Hewlett-Packard Co.
However, he said the growing demand for the company’s microcontroller integrated circuits (IC), that are crucial to making sensors embedded in a variety of wearable applications become functional, could be a wild card this year.
“Our checks suggest it will start shipment of touchpad IC for a glass device in the second quarter 2014 and ramp [up production of] touch controller IC for watch in the second half this year,” Su said in a client note on Wednesday.
“It is also involved in developing fingerprint sensors with capacitive sensing method [similar to iPhone 5S] for mobile devices and optical sensing for security applications,” he added.
In his note, Su did not name the potential makers of wearable glass, smartwatch and other mobile products.
However, the Chinese-language Liberty Times [the Taipei Times’ sister newspaper] reported on Friday that Elan is likely to win orders from Google Inc for its next-generation Google Glass, without citing sources.
The newspaper also said Elan had confirmed that it is to supply tailor-made touchscreen ICs to new Google Glass, which will be unveiled next quarter.
The company is currently in the design stage of the new fingerprint sensors.
The report came as wearable devices connected to a smartphone to meet the fitness, health and other needs, have become one of the main features at that week’s Consumer Electronics Show (CES) in Las Vegas, Nevada.
According to Juniper Research’s latest forecast, the smart wearable-device market is expected to reach US$19 billion by 2018 compared to US$1.4 billion last year.
Yuanta Securities Co (元大證券) analyst George Chang (張家麒) said Elan’s business strength would gain steam this year after Microsoft Corp’s expected end of its support for the Windows XP operating system in April.
Chang added that this would compell businesses to buy new computers that are equipped with power sticks and touch pads.
As the company dividend yield stays at between 6 percent and 7 percent, Yuanta said it is time for investors to collect stock and raised its target price on Elan’s shares to NT$64 from NT$60, while Credit Suisse reiterated its “outperform” rating and maintained its target price at NT$60.