Memorychip maker Winbond Electronics Corp (華邦電子) yesterday reported that its net profit plunged 67 percent sequentially last quarter because of price erosion and slumping demand for PC and handset chips due to high inventories.
However, the company said it was optimistic about demand this quarter and next year.
“[Order] visibility is good for October and November,” company president Chan Tung-yi (詹東義) said.
“We are seeing strong customer demand for Winbond’s DRAM chips in the fourth quarter. Demand from tier one clients is increasing because of an improved product portfolio,” Chan said.
That uptrend will help offset weakness in end product demand this quarter, Chan said, adding that the fourth quarter would be better than last year when revenue fell 5 percent sequentially.
Building on the bullish outlook, Winbond’s board yesterday approved new capital spending of NT$4.7 billion (US$160 million), mostly for next year. That represented a big jump from this year’s forecast expenditure of NT$2.4 billion.
“We have to adjust our capacity to meet customer demand next year based on feedback from our clients,” Chan said.
The investment will primarily be channeled into upgrading the chipmaker’s technologies, as the company plans to develop more memorychips with bigger storage to one gigabit, he said.
In the July-to-September quarter, net profit shrank to NT$137 million from NT$416 million in the second quarter, the company’s financial statement shows. Last quarter was its second profitable quarter after seven straight quarters of losses.
Gross margin slid to 22 percent last quarter, from 23 percent in the second quarter, which was the highest in two years.
The results were lower than SinoPac Securities Investment Service Co (永豐投顧) analyst Martina Huang’s (黃瑞君) forecasts on Oct. 3 of net profit of NT$396 million and gross margin of 23.7 percent.
Winbond said that demand for flash memorychips was weak and prices fell because of overcapacity. Flash memory accounted for 41 percent of its total memorychip revenue of NT$6.51 billion last quarter.
Chan said Winbond only indirectly benefited from a short supply of PC DRAM chips after a fire forced South Korean maker SK Synix to shut down one of its plants last month.
The incident moderately boosted the price of specialty DRAM chips, Winbond’s biggest revenue source, accounting for 48 percent of its overall memorychip output, he said.
Demand for low-power mobile DRAM chips was sluggish as handset customers suffered from high inventories due to model transition, Winbond said, leading to a 21 percent sequential decline in revenue last quarter.
To minweak PC and handset sectors, Winbond is expanding its business to offer chips used in the auto and industrial sectors. Chan expects these new businesses to account for a double-digit percentage of its total revenue by 2015, compared with 5 percent last quarter.
Winbond sells chips used in cars to automobile brands, rather than the aftermarket, he said.
Winbond shares rose 0.91 percent to NT$7.80 yesterday, outperforming the TAIEX, which rose 0.24 percent.
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