Novatek Microelectronics Corp (聯詠), which designs display driver chips used in TVs, PCs and smartphones, yesterday said its revenue this quarter would shrink about 9 percent sequentially, due to the double impact from New Taiwan dollar’s appreciation and softening demand.
Customers are shifting to a conservative mode and cautious about placing new orders in the third quarter as tariff-related front-loading demand is ebbing, Novatek said, adding that consumer electronics demand in China is cooling following the expiration of Beijing’s subsidies on new purchases.
Additionally, the company’s revenue, which is denominated in NT dollars, would be fully impacted by the appreciation of the local currency, as a majority of its products are quoted in US dollars, Novatek president Steve Wang (王守仁) said in an online earnings conference.
Photo: Grace Hung, Taipei Times
“Overall, we expect Novatek’s revenue will continue its slide during the third quarter,” Wang said. “For the fourth quarter, we are closely monitoring how the US tariffs would come into play, since tariff rates are mostly determined.”
Revenue this quarter is expected to dip to between NT$23.7 billion and NT$24.7 billion (US$790.3 million to US$823.6 million), compared with NT$26.7 billion in the second quarter, he said.
The revenue decline would be across-the-board with all product lines affected, he said.
The large display driver chips used in TVs and PCs would see the deepest decline in revenue on a quarterly basis, he added.
That would be followed by chips and timing controllers for TVs and monitors, while mid-and-small-sized display driver chips mainly used in mobile phones and tablets would see the mildest decline, Wang said.
Mid-and-small-sized display driver chips were the biggest revenue contributor last quarter, accounting for 40 percent, followed by TV chips and large display driver chips.
Novatek failed to meet its gross margin target of between 37 percent and 40 percent for last quarter, as the dramatic appreciation of the NT dollar erased 2.5 percentage points from its margin, the company said.
The company is assuming that the currency would strengthen 5 percent to NT$29.5 against the US dollar this quarter, extending its upward trend in the second quarter.
Gross margin this quarter is to be between 34 percent and 37 percent, compared with 36.3 percent in the second quarter, Wang said.
Net profit last quarter dipped about 29 percent sequentially to NT$3.74 billion from NT$5.26 billion, hitting the lowest level in about 18 quarters, Novatek said.
That represented an annual decline of 30.61 percent from NT$5.39 billion.
Earnings per share dropped to NT$6.14 from NT$8.65 in the second quarter and NT$8.86 a year earlier.
The firm booked NT$669 million in foreign exchange losses last quarter, leading to a non-operating loss of NT$221 million.
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