Wistron faces margin pressure despite strong Q2 revenue growth

Taiwanese electronics manufacturer Wistron announced its second-quarter financial results, revealing a revenue of NT$17.21 billion. This figure represents a 8.1% increase from the previous quarter and an 18% rise year-on-year, surpassing initial expectations. The company's performance was bolstered by strong demand in certain product segments.

Despite the revenue growth, Wistron's gross profit margin saw a decline. The company cited an increased contribution from its lower-margin smart living product line and the impact of a stronger New Taiwan Dollar as key factors. Consequently, the gross profit margin for the quarter was 14.8%, a decrease of 1.1 percentage points from the previous quarter and 2.7 percentage points from the same period last year. Net profit after tax stood at NT$580 million, down 3.3% quarterly and 20.9% annually.

Looking ahead to the third quarter, Wistron's President, Hsiao Ying-yi, expressed a cautious outlook, acknowledging persistent challenges in terminal demand and the supply chain. The company faces significant pressure from material shortages and rising costs, with limited customer willingness to absorb price increases. Hsiao noted that the supply chain is currently in a "material is king" situation, making it difficult to negotiate with suppliers and potentially hindering the assembly of complete products even with orders in hand.

Despite these headwinds, Wistron projects a mid-double-digit year-on-year revenue increase for the third quarter. This growth is expected to be driven by new consumer audio product launches and robust AIoT demand, which should offset the impact of a weaker PC market. The company anticipates that information products will decline due to softening PC demand, while smart living products will see high double-digit growth, and automotive and smart IoT segments will experience mid-double-digit growth.

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The supply chain has entered a 'material is king' situation.