Powerchip Semiconductor Manufacturing Corp (力積電) yesterday reduced capital spending for this year by about 43 percent to US$850 million, due to sluggish demand for display driver ICs and DRAM chips.
The company primarily makes display driver ICs and power management ICs.
Powerchip had planned to invest US$1.5 billion in new facilities and manufacturing equipment to expand 12-inch wafer capacity in Miaoli County’s Tongluo Science Park (銅鑼科學園區).
Photo: Grace Hung, Taipei Times
However, sluggish demand for CMOS image sensors and driver ICs used in handset and TV displays have caused a significant increase in customers’ inventories, it said.
Inventories at DRAM customers have also been piling up, due to sluggish demand, it added.
The DRAM, display driver IC and image sensor businesses contributed about 62 percent to the company’s revenue last quarter.
“Customer demand has reversed after our revenue peaked in the second quarter,” Powerchip president Brian Shieh (謝再居) told an online conference. “We expect customers to request production cuts to adjust their inventories in the third and fourth quarters.”
As some customers, mainly driver IC companies, have defaulted on long-term supply agreements, Powerchip has agreed to extend some contracts by six months to one year to help customers avoid payment penalties, Shieh said.
Aside from sagging demand, serious delays in construction at the science park, limited accessibility to key manufacturing equipment and labor shortages have factored in the decision to reduce capital spending, he said.
Powerchip expects the new fab to start test runs in the third or fourth quarter of next year, rather than at the beginning of next year, Shieh said.
The chipmaker expects revenue decline this quarter to slow down from last quarter’s 12 percent drop, he said.
Net profit last quarter dropped 13.5 percent to NT$6.07 billion (US$190.3 million), compared with NT$7.02 billion in the second quarter.
On an annual basis, net profit surged 37.64 percent from NT$4.41 billion.
In the first three quarters of this year, net profit soared about 99 percent to NT$19.72 billion from NT$9.89 billion a year earlier, with earnings per share expanding from NT$3.07 to NT$5.4.
The US’ new curbs on chip exports to China would benefit the company, as it would lead to more orders from customers, Powerchip said.
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