Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Phison Electronics Corp (ROCO:8299, Financial) reported a slight increase in revenue for CQ3, despite a weak consumer market.
- The company is seeing growth in its enterprise business, which is expected to contribute significantly to future revenue.
- Phison Electronics Corp has secured over 20 new design wins in the automotive sector, ensuring long-term supply agreements.
- The company is investing in AI solutions and has received positive market feedback, indicating potential for future growth.
- Phison Electronics Corp is expanding its presence in data centers and automotive markets, which are expected to drive higher margins.
Negative Points
- The consumer market, particularly for retail SSDs, remains very weak, impacting overall revenue growth.
- Gross margins have been negatively affected by inventory write-downs and a challenging pricing environment.
- The company faces difficulties in the AI sector due to a lack of software development support from third-party companies.
- Phison Electronics Corp's operating profit declined in CQ3 due to inventory write-offs and investment losses.
- The company anticipates continued pressure on margins for the next two quarters due to market conditions.
Q & A Highlights
Q: Can you provide the outlook or guidance for each sector, including consumer, industrial, gaming, and others?
A: The lowest order was in September, but orders improved by 20% in October. Enterprise business is focusing on AI applications, with revenue expected in Q1 next year. Overall, Q4 aims to maintain the same level as Q3, unless we decide to cut prices, which is not preferred. (Respondent: Unidentified_2)
Q: What factors impacted your gross margin by around 2% in Q3, and how do you see it in Q4?
A: The goal for Q4 is to maintain a flat gross margin compared to Q3. High-cost inventory from Q1 and Q2 was written off, and we are buying at lower prices. We aim to keep the margin stable without aggressive price cuts. (Respondent: Unidentified_2)
Q: If your AI SSD is widely adopted, will competitors release similar products?
A: We don't expect competitors to develop similar products independently. We have a strong position and are prepared to protect our interests if necessary. (Respondent: Unidentified_2)
Q: When do you expect NAND prices to recover, and what is the outlook for spot and contract prices?
A: The market is transparent, and NAND companies are unlikely to cut prices below margin. If prices continue to decline, production cuts are expected, which could stabilize prices. (Respondent: Unidentified_2)
Q: How do you expect enterprise contributions to impact future profitability, given their higher margins compared to consumer products?
A: Enterprise SSDs have two business models: selling drives and providing design services. While gross margins won't be extremely high due to component costs, we expect revenue and net profit growth, improving our buying power. (Respondent: Unidentified_2)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
