Powerchip Semiconductor Manufacturing Corp (力積電), which manufactures DRAM chips and driver ICs on a contract basis, yesterday said it could continue to post operating losses in the second half of the year, as cautious consumer spending casts a cloud over business prospects.
Powerchip slipped into the red last quarter, reporting an operating loss of NT$66 million (US$2.12 million) versus an operating profit of NT$334 million in the first quarter. It was the first operating loss reported by the chipmaker since its return to the local equity market in 2019.
However, thanks to foreign-exchange-related gains, Powerchip posted a net profit of NT$617 million, compared with NT$187 million in the first quarter. That translated into earnings per share of NT$0.15, up from NT$0.05 in the first quarter.
Photo: Lam Yik Fei, Bloomberg
The Hsinchu-based chipmaker said its businesses have stabilized as customers’ inventory digestion nears an end, but it has yet to see clear signs of a recovery.
The company aims to minimize its operating losses this quarter by shutting down some underutilized manufacturing equipment to save on costs, Powerchip president Brian Shieh (謝再居) told an online investors’ conference.
“We believe such cost-saving measures would help offset the downtrend in average selling prices and help us keep operating losses within a small range,” Shieh said.
Overall, factory utilization is to remain at about 60 percent this quarter, as chip demand remains fragile, Shieh said.
The chipmaker said it has received short-term demand to rebuild inventories for display driver ICs and CMOS image sensors, but it needs more long-term orders to support its quarterly revenue.
In addition, demand for power management and radio-frequency chips used in vehicles and industrial devices appears weak, as customers are not as keen to secure chip supply as they were before, Powerchip said.
As a result, Powerchip expects its “operations in the third quarter would be little changed from that of the second quarter,” Shieh told investors.
Consumers in the US and Europe are conservative about spending on consumer electronics due to high inflationary pressures, Shieh said.
In China, its economic outlook looks gloomy in the short term as the much-anticipated revenge spending did not occur after China emerged from the COVID-19 pandemic, he said.
“It is difficult for us to expect a quick improvement in market sentiment. We are conservative about the third-quarter outlook,” Shieh said.
Revenue this quarter is likely to drop by a single-digit percentage from the second quarter’s NT$11 billion, Shieh said.
Gross margin is expected to shrink 1 to 2 percentage points in the third and fourth quarters from 16.8 percent last quarter, the chipmaker said.
The DRAM chip segment is a bright spot, Powerchip said.
The company said it has been receiving more inquiries about DRAM chips from Chinese customers following US curbs on chip exports.
Powerchip yesterday revised up its capital spending to US$1.93 billion for this year from its previous estimate of US$1.89 billion, mostly to fund the construction of a new 12-inch fab in Miaoli County’s Tongluo Science Park (銅鑼科學園區).
Commenting on potential capacity expansion in Japan together with SBI Holdings Inc, the chipmaker said its Japanese partner would be in charge of funding, while Powerchip would provide technology support.
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