Shares of Elan Microelectronics Corp (義隆電子) yesterday tumbled 4.22 percent after the chip designer gave a gloomy financial forecast for this quarter given weaker-than-expected demand for notebook computers and penalties for not exercising a contract signed with its chip supplier.
As customer demand has weakened significantly, Elan said it opted not to honor a three-year chip supply agreement with a foundry service provider, making it the nation’s first chip designer to default on a chip supply contract.
During the height of the chip crunch in the past two years, many chip designers signed long-term supply agreements with foundry service providers to secure supply.
“Customers have become extraordinarily conservative at this point, even though some of them have managed to lower their inventory compared with the same period last year,” Elan chairman Yeh I-hau (葉儀皓) said. “Our orders from Chromebook makers are only half of that last year.”
As customer demand dipped, Elan chose to default on the supply contract and book the full penalty this quarter, Yeh said.
Elan’s stock price sank to NT$79.50 yesterday, underperforming the TAIEX, which gained 0.31 percent.
Commenting on customers’ inventory digestion, Yeh said most Windows-based PC makers are expected to complete their inventory correction at the end of this year, but Chromebook makers would take a longer time — likely the first or second quarter of next year.
“We hope the fourth quarter would be the worst period,” Yeh said.
Revenue is forecast to plunge sequentially between 29 percent and 38 percent to between NT$1.8 billion and NT$2 billion (US$55.9 million and US$62.1 million) this quarter from NT$2.82 billion last quarter.
Three months ago, Elan, which designs chips for PC touch pads and laptop touch screens, expected revenue to pick up this quarter after a 32 percent sequential decline last quarter.
“However, we saw purchasing sentiment worsen, with PC brands cutting their sales forecast because of weak consumer demand, which slowed inventory digestion,” Elan spokesman Dennis Liu (劉代銘) told investors during an online meeting on Thursday.
“All of our product lines have shown weak momentum in the fourth quarter compared with the third quarter,” he said.
Gross margin is forecast to range from 45 percent to 47 percent this quarter, compared with 46 percent last quarter, as demand for high-margin touch screens drops, Liu said.
Operating margin is expected to plunge to between 3.6 percent and 9.8 percent this quarter, from 18.9 percent last quarter. That meant Elan’s bottom line might approach the break-even point this quarter.
Last quarter, Elan reported that net profit contracted 33 percent to NT$522 million from NT$784 million in the third quarter. That represented an annual decline of 62 percent from NT$1.32 billion.
Earnings per share fell to NT$1.83 last quarter, from NT$2.75 in the second quarter and NT$4.7 in the third quarter last year.
Six Taiwanese companies, including contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), made the 2025 Fortune Global 500 list of the world’s largest firms by revenue. In a report published by New York-based Fortune magazine on Tuesday, Hon Hai Precision Industry Co. (better known as Foxconn) ranked highest among Taiwanese firms, placing 28th with revenue of US$213.69 billion. Up 60 spots from last year, TSMC rose 60 places to reach No. 126 with US$90.16 billion in revenue, followed by Quanta Computer Inc. at 348th, Pegatron Corp. at 461st, CPC Corp., Taiwan at 494th and Wistron Corp. at 496th. According to Fortune, the world’s
NEW PRODUCTS: MediaTek plans to roll out new products this quarter, including a flagship mobile phone chip and a GB10 chip that it is codeveloping with Nvidia Corp MediaTek Inc (聯發科) yesterday projected that revenue this quarter would dip by 7 to 13 percent to between NT$130.1 billion and NT$140 billion (US$4.38 billion and US$4.71 billion), compared with NT$150.37 billion last quarter, which it attributed to subdued front-loading demand and unfavorable foreign exchange rates. The Hsinchu-based chip designer said that the forecast factored in the negative effects of an estimated 6 percent appreciation of the New Taiwan dollar against the greenback. “As some demand has been pulled into the first half of the year and resulted in a different quarterly pattern, we expect the third quarter revenue to decline sequentially,”
WEAKER ACTIVITY: The sharpest deterioration was seen in the electronics and optical components sector, with the production index falling 13.2 points to 44.5 Taiwan’s manufacturing sector last month contracted for a second consecutive month, with the purchasing managers’ index (PMI) slipping to 48, reflecting ongoing caution over trade uncertainties, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. The decline reflects growing caution among companies amid uncertainty surrounding US tariffs, semiconductor duties and automotive import levies, and it is also likely linked to fading front-loading activity, CIER president Lien Hsien-ming (連賢明) said. “Some clients have started shifting orders to Southeast Asian countries where tariff regimes are already clear,” Lien told a news conference. Firms across the supply chain are also lowering stock levels to mitigate
DIVERSIFYING: Taiwanese investors are reassessing their preference for US dollar assets and moving toward Europe amid a global shift away from the greenback Taiwanese investors are reassessing their long-held preference for US-dollar assets, shifting their bets to Europe in the latest move by global investors away from the greenback. Taiwanese funds holding European assets have seen an influx of investments recently, pushing their combined value to NT$13.7 billion (US$461 million) as of the end of last month, the highest since 2019, according to data compiled by Bloomberg. Over the first half of this year, Taiwanese investors have also poured NT$14.1 billion into Europe-focused funds based overseas, bringing total assets up to NT$134.8 billion, according to data from the Securities Investment Trust and Consulting Association (SITCA),
RSS