ChipMOS Technology has embraced a cautious approach to capital expenditures for 2025 and anticipates that the demand for display driver ICs will experience a more pronounced correction compared to that for memory chips.
ChipMOS chairman Shih-Jye Cheng indicated a cautious outlook for the fourth quarter of 2024, though he expects the second-half performance to slightly exceed that of the first half. The company will focus on boosting utilization rates but anticipates a sharper correction in display driver IC (DDI) testing and packaging compared to memory chips. Capital expenditures for 2025 are set to remain within 15% to 20% of revenue.
ChipMOS posted third-quarter consolidated revenues of NT$6.068 billion (approx. US$190.61 million), up 4.4% from the previous quarter and 8.7% compared to the same period last year. The gross margin was 13.9%, a slight drop from 14.03% in the second quarter and down about two percentage points compared to the same period last year. Operating profit margin improved by 0.5 percentage points quarter over quarter to 6.93%, though it declined by 1.8 percentage points year over year. After-tax profits fell 33.6% quarter over quarter and 48.4% year over year to NT$299 million, largely due to foreign exchange losses of approximately NT$73 million.
ChipMOS noted that the decline in utilization rates and rising costs contributed to a slight quarterly reduction in gross margins. The company's packaging production lines have been affected by customer inventory adjustments, leading to a drop in utilization rates to 58%. Overall utilization for the third quarter was around 67%, down from 69% in the second quarter.
Among the product segments, memory products accounted for 36.3% of revenue, showing a 1.1% increase quarter over quarter and a 16.2% increase year over year. DDI and gold bump products made up 53.1% of revenue, with a 4.3% increase quarter over quarter and a 0.8% increase year over year. Cumulatively, after-tax profits for the first three quarters totaled NT$1.188 billion, marking a 15.8% decrease compared to the same period last year.
The third quarter marked a high point for ChipMOS in 2024, with a seasonal decline expected in the fourth quarter. Memory testing operations are set for modest adjustments, driven by weak demand and customer inventory corrections. DRAM activity remains steady, while NAND may see minor corrections due to weaker consumer electronics demand, and NOR adjustments are anticipated as customers modify inventories seasonally.
Despite lower utilization rates among major memory manufacturers, ChipMOS continues to maintain some shipment volume. To counter pricing pressures in consumer electronics, the company plans to focus on expanding DDR5 and LPDDR4 offerings while expecting sustained growth in high-stacking NAND products.
Corrections in DDIs are expected to be sharper than in memory products, driven by weak television demand and mobile phone inventory adjustments. Automotive panel and OLED demand has also been affected by inventory levels. However, recent urgent orders for large-sized televisions suggest the market could be stabilizing, potentially signaling a bottom.
Chairman Cheng noted that rising gold prices have led ChipMOS to develop cost-effective silver alloy bump technology, which has now passed verification for small to medium-sized panels. Several clients are incorporating this innovation into their designs, as it promises substantial cost savings. This development has generated cautious optimism for future growth.
Looking ahead to capital expenditures, ChipMOS indicated that its planning for 2024 aims for a revenue proportion of 20% to 25%, while for 2025, it intends to keep capital expenditures below 20%, estimating them to fall within the range of 15% to 20% of revenue.
Article translated by Jingyue Hsiao
