IC design service provider Faraday Technology expects revenues to drop by a single-digit rate sequentially in the fourth quarter of 2011, affected by slowing demand from its clients amid the present uncertain macroeconomic environment.
Gross margin and operating margin for the fourth quarter are estimated at above 40% and 11-13%, respectively, the company added.
Faraday pointed out that orders placed by display clients began to drop in the third quarter, while those from the PC sector stayed flat. As for the consumer electronics segment, only orders placed by Korea-based customers were brisk during the third quarter, Faraday said.
Orders from the display sector will continue to slip in the fourth quarter, Faraday indicated. Meanwhile, orders for consumer products from Korea-based clients are expected to remain strong, Faraday said.
Faraday reported NT$1.37 billion (US$47.3 million) in revenues for the third quarter of 2011, down 1.8% on quarter and 18% on year. Gross margin and operating margin for the quarter stood at 43.6% and 20.1%, respectively.
However, Faraday still saw after-tax losses totaling NT$79 million for the third quarter due to losses from deferred income tax assets. EPS came to negative NT$0.20.
Faraday revealed third-quarter revenues were lower than its guidance due to weaker-than-expected demand for ASIC solutions in almost all applications. Faraday originally estimated single-digit sequential growth.
As a proportion of company revenues, sales of ASIC products decreased to 78.6% in the third quarter from 78.9% in the second. IP and design fees, respectively, contributed 11.7% and 9.7% to company revenues in the third quarter.
Of Faraday's ASIC revenues, sales of display applications accounted for 15.8% in the third quarter, down from 20.1% in the second quarter. Meanwhile, the proportion of consumer product sales grew to 10% from 6.4% in the prior quarter.
Geographically, Faraday saw Korea account for 10.4% of company revenues in the third quarter, compared to only 4.5% in the second quarter. Taiwan remained the largest contributor to Faraday's sales in the third quarter, accounting for 46.3% followed by the US with 14.8%.
In addition, Faraday disclosed that sales generated from USB 3.0 IP products currently account for 5-10% of company revenues. The company also said its USB 3.0 host chips stand a chance of entering the supply chain for ultrabooks.
In other news, Faraday's speculated orders for eMMC solutions from Samsung Electronics are seen as another growth driver for the company in 2012. Faraday reportedly has landed orders for eMMC chips used in smartphones and controllers from Samsung with deliveries through 2012.