Phison Electronics Corp (群聯電子), which supplies NAND flash memory controllers and modules, reported that last quarter’s net profit plunged 31 percent year-on-year due to seasonal weakness and lower prices for its products.
Net profit slumped to NT$882.3 million (US$29.63 million) from NT$1.28 billion during the same period a year earlier, marking the lowest level in 13 quarters, while earnings per share fell to NT$4.48 from NT$6.5 a year earlier, the company said on Friday last week.
On a quarterly basis, net profit contracted 31 percent from NT$1.29 billion, or NT$6.54 per share.
Gross margin for last quarter fell to 18.9 percent from 30.7 percent for the same period a year earlier, while operating margin dropped to 11.2 percent from 17.7 percent.
“Its first-quarter margin was not bad considering the magnitude of the fall in its NAND prices (and the fall in its share price) over the past six months,” Yuanta Securities Co (元大證券) semiconductor analyst George Chang (張家麒) said in a research note on Friday last week.
Phison shares closed up 1.51 percent at NT$269 on Friday in Taipei trading. However, the stock has dropped 18.73 percent over the past six months.
The company said that demand for NAND flash memory is likely to gradually recover this quarter after a sluggish first quarter due to seasonal factors, while prices are expected to pick up from a downward spiral that started in the middle of last year.
“After last year’s supply crunch — the worst in the industry’s history — the NAND flash memory industry is returning to a healthy supply-and-demand balance this year,” a company statement said.
“Prices for NAND flash memory are stabilizing. We expect the prices to bounce back around the time of the Computex trade show,” Phison chairman Pua Khein-seng (潘健成) told an investors’ conference on Friday.
“Supply might become tight again in the third quarter,” Pua added.
The annual Computex Taipei electronics exhibition is to begin on June 5 at the Taipei World Trade Center Exhibition Hall and Nangang Exhibition Hall.
The company’s net profit is expected to be much better in the second quarter than in the first quarter, and the improvement in gross margin is likely to continue through next quarter, given robust customer demand, Pua said.
Yuanta forecast that Phison’s revenue and earnings would see sequential growth in the coming months, as device customers plan to build inventory ahead of the seasonal uptick in the second half of the year.
The brokerage forecast earnings per share of NT$5.3 this quarter and NT$22.6 for the whole of this year.
“Although a year-on-year contraction of earnings per share looks inevitable, this year will still mark the fourth consecutive year with earnings per share of NT$20 or higher, suggesting that its ‘structural profitability’ looks sustainable cycle after cycle,” Chang said.
However, Pua predicted that a supply glut could materialize in 2020, adding that it is his long-term fear.
Six NAND flash memory fabs are under construction and are to begin production in two years, he added.
A positive sign for the company is its progress in developing NAND flash memory controllers for embedded memory chips used in smartphones, Pua said.
Phison is to begin supplying a tier-one Chinese smartphone brand the new controller products this quarter, in collaboration with the world’s two largest mobile phone chip suppliers, he said, without giving details.
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