TPK Holding Co (宸鴻), a major supplier of touchpanels used in Apple Inc’s devices, yesterday said revenue might drop by 18 percent this quarter from last quarter.
“One of TPK’s largest clients said it is to see a quarterly drop in revenue of between 14 and 19 percent this quarter... It is inevitable that we will face a similar dire situation,” TPK chief financial officer Freddie Liu (劉詩亮) told an investors’ conference in Taipei.
TPK did not name the client.
Photo: CNA
TPK chief executive officer Michael Chung (鍾依華) said the US client’s forecast of slowing sales for its smartphones this quarter poses a serious challenge for firms in the supply chain.
Although the US client launched new tablet products this quarter, the shipment volume and contribution is far less than what is needed to offset the decline in the smartphone segment, Chung said.
Chung said TPK is codeveloping the US client’s next generation of smartwatch, which is expected to enter production this quarter, but the sales contribution from wearables is only expected to be more meaningful in the second half of this year.
TPK is also codeveloping a new product with the client, which would benefit sales and profitability, but the contribution is not as large as with smartphones, Chung said.
Overall, Liu said TPK predicts headwinds for its sales and profitability this quarter.
After taking into account seasonal factors and the major client’s sales forecast, Liu said TPK’s sales for this quarter might decline by about 18 percent from last quarter’s NT$21.23 billion (US$657.7 million).
Chung said he is more optimistic over the outlook in the second half, when TPK’s major clients are scheduled to launch new wearables, smartphones and two-in-one detachable notebooks.
The company’s forecast for near-term operations came after it reported disappointing earnings results for last quarter, due to the US client’s poor smartphones sales.
Net income was NT$52 million last quarter, compared with net losses of NT$1.01 billion a year earlier and down 94.88 percent from net income of NT$1.01 billion the prior quarter.
Earnings per share were NT$0.15, compared with last year’s loss per share of NT$3.06 and the previous quarter’s earnings per share of NT$2.89.
Liu said TPK’s utilization rate and product mix were affected by the major client’s weaker-than-expected smartphone sales, which hurt TPK’s margin performance last quarter.
Gross margin fell 1.85 percentage points annually and 2.02 percentage points quarter-on-quarter to 4.7 percent last quarter, Liu said, adding that operating margin swung to the negative, reaching 1.7 percent compared with last year’s 0.31 percent and the prior quarter’s 1.02 percent.
“Last quarter, smartphone shipments were only 40 percent of our previous forecast and tablet shipments were also 40 percent of TPK’s estimate... The scale of the decline [in the major client] was larger than our expectations,” Liu said.
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