Novatek Microelectronics Corp (聯詠), a supplier of display driver ICs, yesterday said that its revenue would plunge as much as 39 percent this quarter as customers pare down orders amid tepid demand for smartphones and other consumer electronics due to a global economic upheaval.
A spike in supply chain inventory is also adding to the already weak momentum of the industry, Novatek told an online investors’ conference.
However, the Hsinchu-based company said that this quarter would be the trough for the year as it is pinning its hopes on new product launches by smartphone vendors to help recoup some losses in revenue next quarter.
Photo: Grace Hung, Taipei Times
“The company is entering a revenue correction period in the second half of this year as demand slumps and inventory piles up,” Novatek president Steven Wang (王守仁) said.
Revenue this quarter is to plunge to between NT$19.1 billion and NT$20.3 billion (US$637.73 million and US$677.80 million), a quarter-on-quarter decline of between 35 and 39 percent from NT$31.46 billion in the second quarter, the company said.
The company’s revenue last month tumbled 15.84 percent month-on-month and 45.07 percent year-on-year to NT$6.87 billion, Novatek said in a statement.
Demand for all three of the company’s product lines is on the wane, extending a downtrend in the second quarter, Novatek said.
Display driver ICs are to suffer the brunt in terms of volume and prices, the company said.
Small display driver ICs for mobile phones were the largest contributor to revenue last quarter, accounting for 39 percent. TV chips had a 33 percent share, while display driver ICs used in TV panels made up the remaining 28 percent, it said.
Gross margin is to dip to between 42 and 44 percent this quarter, after registering a 4.35 percentage points decline to 47. 62 percent last quarter, the company said.
Novatek expects the downtrend to carry into next quarter, but it would be a less drastic decline as it attempts to negotiate lower wafer prices to cut costs.
Novatek said it is in talks with suppliers of raw materials such as wafers to have some flexibility in executing their supply agreements. The company has included provisions for not fully honoring the agreements in the third-quarter forecast.
The company said a complete inventory adjustment would take two quarters.
Novatek booked a higher-than-normal level of inventory of NT$18.8 billion last quarter, which translates to 103 days.
Novatek offered the bleak outlook for the current quarter after reporting disappointing quarterly earnings. Revenue contracted 13.83 percent quarter-on-quarter and 7.77 percent year-on-year to NT$31.46 billion in the second quarter, missing the company’s target of NT$34.5 billion.
Net profit contracted 13.28 percent year-on-year to NT$8.49 billion last quarter, a quarter-on-quarter decline of 23.78 percent from NT$11.13 billion.
Earnings per share fell to NT$13.95 last quarter, compared with NT$16.08 a year earlier and NT$18.3 a quarter earlier.
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