NAND price drop leads to rising demand, memory controller chip manufacturers benefit

Phison, a flash memory controller chip manufacturer, announced today (10th) its consolidated financial results for the first quarter of 2019. Benefiting from the growth in total shipments of flash memory (NAND Flash) controller chip ICs and memory modules and a healthy product portfolio, its profits and gross profit margin both increased compared to the previous quarter.

       Phison's first quarter consolidated revenue was NT$9.343 billion (same unit below). Affected by the loss of investment in Kingston Solutions Inc., the net profit after tax was NT$880 million, up 10.54% from the previous quarter, roughly the same as the same period last year. However, due to the continuous optimization of product portfolio, the gross profit was NT$2.094 billion, an annual growth of more than 15%, a gross profit margin of 22.41%, and earnings per share of NT$4.47.

       Phison pointed out that compared with the same period last year, the total shipment of NAND Flash control chip IC increased by nearly 20%, memory modules increased by nearly 60%, and SSD and eMMC finished products increased by nearly 65%. The total number of memory module shipments increased by more than 120%, indicating that the decline in NAND market prices has stimulated the increase in terminal demand and driven the continuous increase in memory module capacity.

       Phison Chairman Pan Jiancheng said that operating expenses in the first quarter of 2019 increased by about 30% compared with the previous period, mainly because Phison was actively deploying advanced processes and next-generation (NAND Flash) control chip ICs. In addition, he mentioned that the stable growth in earnings per share represents that Phison's past product planning and NAND application market strategy direction were accurate, allowing it to respond to the rapid fluctuations in the NAND Flash market.

       In addition, regarding the recognition of losses, Phison recognized a loss on its investment in KSI due to weak demand in the mobile phone market. However, as major mobile phone manufacturers will release new phones in the coming quarter, demand is expected to pick up, which will contribute to KSI's revenue.

       Industry insiders said that if investment losses are excluded, the earnings per share in the first quarter of this year can be recovered by nearly 1 yuan, which shows that the company's core business operations are healthy. In the Sino-US trade war, Taiwanese manufacturers have relative advantages and opportunities. Phison, which is designed, manufactured and produced in Taiwan, has gradually achieved the results of its steady layout in the past. Under the competition between the two giants, the follow-up prospects are promising.