Microcontroller unit (MCU) manufacturer Holtek has observed increasing demand for small household appliances during China's Singles' Day and Double 12 shopping festivals. The company also notes positive effects of the Chinese government's subsidy policies, which have stimulated market activity.
Director Jung-Tsung Tsai expressed strong confidence in the company's outlook for 2025, stating that their goal is to achieve profitability by the first quarter of 2025.
Holtek's operations in 2024 have faced pressure from high inventory levels and weak end-user demand, resulting in continued losses in the third quarter. Revenue reached NT$683 million (approx. US$21 million), showing a slight quarter-over-quarter increase of 0.1% and marking two consecutive quarters of growth, with a year-over-year increase of 8.24%. The net loss attributable to the parent company after tax for the third quarter was NT$72.69 million. The cumulative revenue for the first three quarters of 2024 totaled NT$1.809 billion, representing a year-over-year decrease of 14.16%.
According to Tsai, the fourth quarter is expected to perform similarly to the third quarter, but he affirmed that performance in 2025 will surpass that of 2024. Currently, the distribution of 2024 revenues shows that the first half accounts for 45%, while the second half makes up 55%. If the fourth quarter performs better than the third quarter, overall results will be comparable to those of 2023. Conversely, if the fourth quarter remains flat, there could be a slight decline of about 4pp for the entire year.
Tsai outlined plans to improve profitability by the first quarter of 2025, with targets including reducing inventory to below NT$1 billion by the second quarter of 2025 and achieving monthly revenues of NT$300 million by the third quarter of 2025. Once these targets are met, the company will have more confidence in improving profitability, with expectations that full-year revenue for 2025 will exceed that of 2024, though maintaining a cautious approach.
Regarding product pricing pressures, Tsai acknowledged that some price adjustments may be necessary for specific key customers, but these changes will be tailored individually rather than implemented universally.
Touch MCUs gradually becoming significant revenue source
Tsai highlighted the noticeable quarterly growth in demand for touch MCUs, which are increasingly becoming a significant revenue source. This growth is primarily attributed to promotional activities during China's Singles' Day and Double 12 events, alongside local subsidy policies. Furthermore, induction stove sales are expected to drive additional growth in touch MCUs, with projected quarterly improvements. The demand for induction stove products is expected to grow by 40% in 2024, with shipments reaching 14 million units.
In the health measurement sector, Holtek maintains nearly a 30% market share in China. Tsai indicated that besides strengthening efforts in China, the company is actively expanding into overseas markets, anticipating strong performance for health measurement products. The quarterly growth for smoke detectors reached 109% in the third quarter, with demand coming from South Korea, China, and Taiwan. An even stronger growth is expected for the first quarter of 2025.
Tsai noted that while subsidy policies during Singles' Day and Double 12 have contributed to demand recovery, the overall demand situation continues to vary by product.
In other developments, Holtek previously launched MCUs for optical communication transceiver modules and continues to introduce related applications. Tsai explained that although customer demand has weakened due to inventory reduction, a recovery is expected in 2025. The company has also released two new products and plans to expand its presence with other manufacturers.
Server cooling module MCUs are currently in the final stages of acceptance testing. Pending successful acceptance, shipments are expected to begin in the first half of 2025.
Discussing cost adjustments for wafer foundry and packaging testing, Tsai revealed that discussions about price adjustments for 2025 have already begun with foundries. Wafer prices may see a slight decrease of around 5pp, while packaging testing prices will be adjusted based on market demand.
Looking ahead, Tsai reported that the average gross margin for the third quarter was 40.8%, and margins should remain around 40% going forward, mainly benefiting from the gradual digestion of high-cost inventory and the anticipated drop in new wafer prices. Additionally, the introduction of new products within the product mix is also expected to boost gross margins.
