SFA SEMICON Philippines Corp. (SSPC) reported its net income plunged by 71% to $1.83 million in 2017, amid stiff competition and higher costs.
In a statement, the local arm of one of Samsung Electronics Co. Ltd.’s South Korean suppliers said its profit was hurt by a 29% jump in cost of sales to $201.07 million. Cost of sales include raw materials, depreciation, labor and other manufacturing costs.
“The increased direct costs and relatively low average selling prices resulted in the 54% decline in gross profit declined from $15.40 million to $6.70 million during the year in review,” SSPC said.
Gross revenues, on the other hand, jumped 21% to $207.77 million in 2017, from $171.82 million the previous year.
SSPC attributed the revenue growth to an 11% increase in production volumes with full-year output rising to 655 million memory devices from the 591 million output in 2016.
The company said another factor that boosted top-line growth was the “shift in product mix from the older DDR3 (double data rate type three) format to DDR4 DRAM (dynamic random-access memory) modules and new orders for the new-generation eMMC (Embedded Multimedia Card) line.”
“The memory segment in the outsourced semiconductor assembly and test (OSAT) industry was affected by increased cost of raw materials and price pressures due to intense competition among OSAT players,” SSPC President Byunggil Go was quoted as saying in a statement.
Mr. Go noted the DRAM and NAND memory OSATs had faced supply constraints in raw materials with the robust recovery in global demand in the semiconductor industry.
For 2017, the Semiconductor Industry Association reported worldwide sales of semiconductors surged 22% to a record-high $412.2 billion, amid double-digit growth in every regional market.
SSPC, which has manufacturing facilities in Clark Freeport Zone, produced 427 million DDR4 DRAM memory modules, 121 million DDR3 DRAM memory modules and 69 million IC memory component chips in 2017.
SSPC was the top exporter in the Clark Freeport Zone last year, with total shipment value at $3.06 billion, 90% higher than the $1.61-billion shipment value recorded in 2016.
Amid cost pressures, Mr. Go said SSPC streamlined its manufacturing processes, secured alternative supplies of raw materials and controlled operating expenses.
SSPC, a wholly owned subsidiary of Korea-based firm STS Semiconductor and Telecommunications Co. Ltd., has a business transaction agreement to supply its products to Samsung Electronics Co. Ltd. until May 2019.