Realtek Semiconductor Corp (瑞昱半導體), which designs Wi-Fi and Ethernet chips, yesterday reported its lowest quarterly net profit in three years after inventory corrections dampened chip demand, but it is seeing a budding recovery in the PC and TV segments that should help it regain revenue growth.
Realtek said it had received rush orders for chips used in PCs, TVs and other consumer electronics during the three-month period to last month.
The momentum is to extend into this quarter, as customers start to replenish inventories, which had been reduced to reasonable levels, the company said.
Photo: Grace Hung, Taipei Times
“We believe we have hit the trough of this downcycle. We expect the second quarter will be a better period than the first quarter. The second half of this year will be better than the first half,” Realtek spokesman Huang Yee-wei (黃依瑋) told an online investor conference.
“As the recovery is mostly coming from the PC and consumer electronics segments, it is premature to say the industry is staging an extensive recovery,” Huang said. “However, messages from customers also show that business visibility for the second half remains dim.”
The company is also seeing a slower upgrade of networking technologies compared with previous generations, Huang said.
The recovery would largely hinge on global economic conditions and geopolitical tensions in Europe, he said.
Worldwide PC shipments this year are to contract about 10 percent year-on-year based on the expectations of major contract PC makers, he said.
PC-related products accounted for 29 percent of the company’s total revenue last quarter, while chips used in non-PC applications made up 71 percent.
Realtek’s revenue contracted 9.8 percent quarter-on-quarter and 34 percent year-on-year to NT$19.63 billion (US$641.04 million) last quarter.
Net profit contracted 15.9 percent to NT$1.79 billion during the first quarter, compared with NT$2.13 billion in the fourth quarter last year, the Hsinchu-based chip company said.
On an annual basis, net profit plummeted 65.4 percent from NT$5.19 billion.
Earnings per share dipped to NT$3.5 last quarter from NT$4.16 the previous quarter and NT$10.15 in the first quarter of last year.
Gross margin dropped to 43.1 percent last quarter, from 43.7 percent in the final quarter of last year and from 52.2 percent in the first quarter of last year.
The company attributed the slimmer gross margin to an unfavorable product mix as it shipped more lower-margin TV and consumer electronics chips, as well as inventory valuation losses.
Intensifying price competition also played a crucial part, it said.
All those unfavorable factors are to stay in place this quarter and weigh on gross margin, it added.
Realtek said it cut its inventory by about 17 percent to NT$21.22 billion last quarter, from NT$25.55 billion in the fourth quarter last year.
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