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September 26, 2017

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Integrated circuit firms' Q3 outlook will be 'conservative'

The China Post news staff--With Taiwan's integrated circuit (IC) operators set to hold their investors' conferences starting this week, it is expected most of them will give a conservative outlook for third quarter, experts said.

Elan Microelectronics, which makes touch control chips, will lead the way by holding its conference tomorrow. Then, Nanya Technology and Inotera, two of the island's major dynamic random access memory (DRAM) chip-makers, will follow suit Wednesday.

Contract chip-makers Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp. (UMC) will hold theirs on July 19 and 25, respectively.

It is expected that during TSMC's investors' conference a major focus will be on whether the company will follow Intel's move to invest in ASML, a major IC equipment maker. Meanwhile, at Nanya Tech's meet, a focus will be on the purchase of Elpida by Nanya Tech partner Micron, experts said.

IC designers and contract manufacturers generally reported sales growth in the second quarter over the first, thanks to clients' efforts to re-stock inventories and strong demand for smartphones and tablet PCs.

TSMC made record sales during the second quarter. The company's Chief Finance Officer Ho Li-mai had said during the April investors' conference that IC supply chain operators' days sales of inventory (DSI) were below average during the first quarter and would go back up to a seasonable level during the second.

According to Daiwa Securities, Asian tech firms' second-quarter average DSI were 37 days, higher than the 31 average from 2007 to the first quarter of this year.

With inventories on the rise and various global uncertainties, the semiconductor industry is expected to be slow in the third quarter, industry players said.

Realtek, for example, has offered a conservative forecast for the third quarter, saying while business from the networking and tablet sectors remains stable, demand from the PC sector remain to be seen.

Many foreign investors have expressed the view that while TSMC may see sales grow in the third quarter, the margin of growth will be narrowed to about 5 percent. According to Daiwa, increased capital expenditure may become a liability in contract manufacturers' pursuit of earnings growth.

The institutional investor on the other hand gave a more positive view for smart phone parts and components makers, saying their third-quarter sales growth would be above average. Smartphone chip design MediaTek, for example, is expected to see a sales growth of 18 percent in the third quarter compared to the second, Daiwa said.

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