Display driver IC (DDI) specialist Himax Technologies, which saw its revenue decline 24.3% sequentially in the second quarter, expects to post another sequential drop of a larger 35-39% in the third quarter.
Himax' gross margin, which slid 3.4pp on quarter to 43.6% in the second quarter, will fall further to between 35.5% and 37.5% in the third quarter, according to the fabless chipmaker.
"The sudden halt in demand, together with the length of our production lead time, has led to elevated inventory level for Q3," said Himax president and CEO Jordan Wu. "While in the midst of this inventory offloading cycle, we are naturally cutting back on new orders with our suppliers. However, the contracts that we entered with foundries and backend suppliers when the industry experienced unprecedented demand in 2021 may incur charges if the minimum purchase orders are not fulfilled."
Himax is negotiating with its suppliers to explore other ways to execute the agreements struck previously, Wu continued. "Such supplier charges have already been factored in for our Q3 guidance and is the predominant factor for the Q3 gross margin contraction," Wu indicated.
Himax expects sales growth to restore as early as the fourth quarter of 2022, with gross margin still going down but modestly. "There is still solid price support from a few product areas, notably automotive, TCON, AMOLED and AI image sensing, which all together now account for more than 40% of total sales. Our automotive sales, especially, have a high likelihood of a strong fourth quarter rebound from the trough of Q3," Wu noted.
In addition, Himax disclosed that its automotive IC business has become the largest revenue contributor. Automotive IC sales are set to represent over 35% of Himax' total sales in the third quarter of 2022. The company also expects its automotive DDI segment to hit a milestone of over 10 million units cumulatively shipped by the end of the third quarter.