Chang Wah Technology (CWTC), a major supplier of IC lead frames, held its earnings call on April 23 in conjunction with its parent company Chang Wah Electromaterials (CWE), during which CWTC manager Su Shuang-Fu noted that the company is prepared to seize the initiative as the market recovers, as signs of a rebound in demand have been appearing since the second half of 2023.
CWTC currently has four plants in Kaohsiung's Nanzih Industrial Park with comprehensive lead frame production lines to meet demands for mid-to-high-end IC and LED packaging and is awaiting customer orders. For the first quarter of 2024, CWTC saw revenue split evenly between etching and stamping processes.
In terms of product lines, IC lead frames accounted for 33% of revenue, followed by discrete lead frames at 19%, QFP at 15%, QFN at 24%, and EMC LED at 9%. Of particular note is its non-lead QFN product line, which was the first to enter and recover from the inventory adjustment phase and has seen a 10 percentage point growth compared to the first quarter of 2023.
CWTC expects QFN to contribute to a growing share of revenue and has previously pointed to QFN becoming mainstream in the global packaging industry. In addition to meeting advanced IC packaging demands, the technology is expected to trickle down and eventually replace SO/BGA/QFP packaging.
When asked about the prospects for automotive ICs, CWTC assistant director Chen Ming-Hsuan offered an opinion contrary to TSMC's negative growth projections at its recent earnings call. According to Chen, IDMs account for nearly the entirety of the global automotive semiconductor market.
Since CWTC's IDM customers are reporting nearly depleted inventories in the first quarter, the company sees positive signs of momentum in the second quarter as inventory adjustments end. However, pull-in momentum might fall short of the industry peak in 2022.
For March 2024, CWTC saw monthly revenue reach NT$909 million (US$27.9 million), a month-on-month increase of 15.2%, and a year-on-year drop of 4.4%. Total revenue in the first quarter was NT$2.737 billion (US$84.1 million), a quarter-on-quarter decline of 6.3%, and a year-on-year decline of 3.3%. Gross margin for the first quarter was 22.1%, a slight drop from the fourth quarter of 2023, but still far ahead of competitors in the industry.
According to CWTC, performance in the first quarter was as expected, coming within the range of NT$2.68–2.84 billion in consolidated revenue predicted in the company's previous earnings call. Even though the Lunar New Year holiday led to the usual dip in revenue in the first quarter, the company still saw its third-highest-ever first-quarter revenue this year.
Growth expected from 2Q24
Looking ahead into the second quarter, inventory adjustments will end, and customers are expected to replenish their inventories as new products begin mass production to meet recovering demand for consumer electronics. CWTC expects to return to a growth trajectory in the second quarter and hopes to post positive growth for the entire year.
CWTC projects second-quarter revenue in the range of NT$2.91–3.09 billion, which will mark growth in the high single digits above the first quarter. Assuming an exchange rate of 32.2 to the US dollar, gross margin is projected to fall between 21.6–24.6%, while operating margin will be within 12.3–15.3%.
CWTC has been developing mini LED products for over two years and has seen major international carmakers adopt its products for their high heat dissipation, reflectivity, temperature resistance, and air tightness. The company's upgraded product solutions have also seen interest among high-end electronics customers, and shipments are expected to grow in the latter half of 2024.
Article translated by Kevin Wang
