The world's third-largest maker of computer chipsets is gaining more sales, but is losing money. Silicon Integrated Systems Corp (SiS, 矽統科技) released third-quarter results yesterday that show a significant increase in sales on last year, and a 27 percent increase on last quarter, but the company made a loss of NT$807 million in the period from July to September.
With revenue of over NT$4 billion in the third quarter, and preliminary results for October of almost NT$2 billion, SiS is on track to top NT$12.5 billion in sales by the end of the year. However the average selling price of its products dropped dramatically, resulting in a huge overall loss.
SiS, Intel Corp and VIA Technologies Inc ((威盛電子) are the leading makers of chipsets in the world. Chipsets work with processors to manage functions like memory and graphics in a computer.
SiS has cut the average price of its chips by around 15 percent for the last two quarters.
"In the third quarter the pressure to cut prices was very severe, so we had to cut prices. In the first three quarters we made very huge losses. We are striving to make a profit in the fourth quarter, but it is very difficult, especially if the environment of price cutting continues," said Jessie Lee (李葦珠), who is in charge of corporate marketing at SiS.
Analysts say SiS does not have much more room to maneuver.
"It will not cut prices by any more than 10 percent as the price of chips is already low," said George Wu (吳裕良), an analyst at Primasia Securities Co.
But SiS will keep on selling. In the third quarter the company sold over six-and-a-half million chips. The forecast for the fourth quarter is for over eight million chips.
However, sales volume alone may not be enough to turn the company's fortunes around. "I think they will be able to achieve their sales targets, but I do not think they can make any money. I have not been able to fully analyze all the figures yet, but I do not think they can make any money by the end of the year," said Lin Chuan-tzu (林純慈), an analyst with Taiwan International Securities Corp (金鼎證券).
SiS' new boss tried to put a positive spin on the disappointing results. "Under a strategy of actively growing market share, SiS' short-term profitability has been affected, but the company has built a more competitive position in the marketplace," said the company's chairman, president and CEO, Samuel Liu (劉曉明), in a statement yesterday.
The company might be able to increase its profitability by using more of the manufacturing capacity of its factory in Hsinchu. "SiS has tried to increase its utilization rate to 100 percent, which should increase its profit margins," said Primasia's Wu. At the end of the third quarter, the company's utilization rate was 80 percent, and it is now around 90 percent, he added.
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