Memorychip maker Winbond Electronics Corp yesterday expressed caution over its business outlook as demand from China remains soft and uncertainties over the global economy deepen.

The Hsinchu-based company offered the conservative guidance after posting record quarterly net profit for last quarter on the back of non-core operation profits.

Customers are adjusting inventories due to an aberration in seasonality, with relatively strong demand in the second quarter, but disappointing in the third quarter, Winbond president Chan Tung-yi told an investors’ conference.

“We will closely watch how inventory adjustments, China’s domestic market and order placements by major customers pan out,” Chan said, calling the next two to three quarters a critical juncture.

Fluctuations in oil prices, interest rate hikes in the US, China’s economic slowdown and the US-China trade war might weigh on demand, Chan said.

However, the company is not pessimistic, as the end market remains healthy and the negative factors might be short-lived, he said.

The world’s No. 3 NOR flash memorychip supplier reported NT$2.92 billion (US$94.2 million) in net profit during the July-to-September period, representing an increase of 29 percent and 35 percent from three months and a year earlier respectively.

The results translated into earnings per share of NT$0.71, an 18-year high attributed mainly to non-core operational income, Winbond chief financial officer Jessica Huang said.

The company recognized NT$546 million in income tax benefits, while booking NT$192 million in operating expenses for a new plant in Kaohsiung, Huang said.

Consolidated revenue was relatively resilient at NT$13.68 billion, with the gross profit margin at 38 percent, 1 percentage point lower from the previous quarter, but 2 percentage points higher than a year earlier, a company financial statement said.

DRAM business, including niche memory and mobile memory products, drove 53 percent of overall revenue, as market demand and production processes improved, Chan said.

The flash memory line generated the remaining 47 percent, Chan said, adding that demand for flash products weakened in the Chinese market, dampening growth.

By application breakdown, consumer electronics drove 30 percent of sales, mobile electronics contributed 27 percent, computer-related gadgets generated 26 percent, and automotive and industrial uses accounted for 17 percent, Chan said.

Winbond will continue to pursue customers at the top of the pyramid, which demand excellent product quality, but weather market tumult well, Chan said, adding that the strategy would help Winbond be less affected by cyclical seasonality in technology.

Winbond reported full-capacity utilization last quarter and would adopt a dynamic approach to deal with fluid market conditions this quarter, Chan said.

NAND flash prices are face correction pressure due to lingering weak demand in China, he said.

By: DocMemory
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