Release Date: July 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Nanya Technology Corp (TPE:2408, Financial) reported a 4.4% increase in net sales for Q2 2024 compared to Q1.
- Gross profit turned positive at TWD287 million, a significant improvement from the previous quarter's gross loss.
- Year-over-year revenue improved by 41.2%, indicating strong annual growth.
- The company has a positive cash flow, with an end balance of TWD65.329 billion, up from TWD62.356 billion at the beginning of the quarter.
- Nanya Technology Corp (TPE:2408) received partner certification from the Alliance for Water Stewardship and ranked in the top 5% in corporate governance by the Taiwan Stock Exchange.
Negative Points
- The company reported a net income loss of TWD813 million for Q2 2024.
- Operating income remained negative at TWD2.319 billion, despite some improvement from the previous quarter.
- The company recognized TWD657 million in earthquake-related losses, significantly impacting financial results.
- Bit shipment decreased by mid-single digits quarter-over-quarter, indicating a decline in volume.
- The market outlook remains uncertain due to unfavorable geopolitical issues and regional economic challenges, which could impact future demand.
Q & A Highlights
Q: Do you expect to return to profitability from the operating margin levels in Q3? What is your expectation for pricing improvement in the second half of this year?
A: Returning to a positive operating margin in Q3 is very challenging. However, there may be a chance to achieve a positive net margin, but it will require significant effort from our team. ASP improvements are expected, particularly for HBM and DDR5 products, while DDR4 may also see some positive adjustments due to inventory adjustments.
Q: Could you share your view on the business trend in Q2 excluding the earthquake impact, and your expectations for shipment growth in the second half of the year?
A: Excluding the earthquake impact, Q2 saw strong momentum in HBM and DDR5, while other markets like mobile, PC, and consumer were relatively flat or in low season. For Q3, we expect seasonality to help improve these areas. The shipment decrease in Q2 was primarily due to market conditions rather than the earthquake.
Q: What is your view on the third-quarter pricing and shipment trends?
A: We expect an uptrend in pricing and shipment in Q3 due to seasonality. DDR5 and DDR4 are likely to see stronger performance, while DDR3 may face challenges due to geopolitical and regional economic factors.
Q: How do you view the potential competition from aggressive capacity expansion by Chinese DRAM projects?
A: Chinese suppliers are increasing production capacity, which impacts the market, especially major suppliers. Their focus is primarily on the mobile market, which consumes a significant portion of mobile DRAM. The impact on smaller suppliers like us is less significant, but we remain vigilant.
Q: Why was the second-quarter sales volume weak, and was it in line with your expectations?
A: The weak sales volume in Q2 was due to flat demand in markets other than HBM and DDR5. Consumer, mobile, and PC markets were in low season, while the server market showed some improvement. The overall demand was not strong, impacting our sales volume.
Q: What is the expected ASP increase for Q3, and how do you plan to achieve more than 20% bit growth this year?
A: We expect a potential ASP increase in Q3, but it will depend on market conditions and product portfolio adjustments. Achieving more than 20% bit growth this year is likely due to the low baseline from last year. We rely on operational efficiency and new technology introductions for bit growth.
Q: Are you still targeting double-digit percent of total wafer shipment based on DDR5 in Q4?
A: Yes, we aim to achieve this target. DDR5 contribution for the whole year will be small, but we hope to increase shipments toward the end of the year. Customer demand for DDR5 is strong, and we are confident in meeting it.
Q: What is the impact of geopolitical issues on NTC's revenue in the second half of 2024 and 2025?
A: Geopolitical issues, combined with regional economic impacts, particularly in Europe, affect demand. The extent of the impact is uncertain, and we will continue to assess and report as we gain more clarity.
Q: Will DDR3 and DDR4 face shortages in Q4 2024?
A: DDR4 may have a chance for shortages due to inventory adjustments, while DDR3 is more challenging due to a shrinking market.
Q: What is the progress on 1C development and future plans for EUV?
A: We are making progress on 1C development with early yields from test products and ongoing EUV development activities. These efforts are preparing us for future fab production.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
