Hua Hong Semiconductor, China’s No 2 contract chip maker, which reported record revenues for the first half on rising demand from the United States, is more worried by a weakening yuan rather than the trade war unfolding in the background.
“So far we have not heard concerns on the trade war from our customers,” said Wang Yu, president and executive director of the company, during a conference call on Wednesday afternoon. “But we are cautious about it and are closely monitoring the situation to see if there will be any impact.”
The sharp depreciation of the yuan, on the other hand, is a more sensitive issue, he told analysts, as its raw materials were priced in US dollars.
The yuan has fallen roughly 9 per cent against the US dollar since March.
Revenues in the first half rose 15.4 per cent year on year to a record US$440 million while profit attributable to owners of the group jumped 25.5 per cent to US$85.9 million in the same period, according to the earnings statement filed to the Hong Kong stock exchange.
For the second quarter alone, revenues rose 16.1 per cent year on year to US$230 million, beating a Bloomberg consensus of US$225.1 million.
China forced to be more restrained in US trade war to protect interests
Revenues alone from the US grew 27 per cent year on year in the second quarter to US$39.8 million on increased demand, the company said.
Three of its top five customers are American – Cypress Semiconductor, Microchip Technology and ON Semiconductor, Bloomberg data shows.
The Trump administration on Tuesday finalised plans to impose new tariffs on US$16 billion worth of Chinese imports, mainly chemicals and electronic parts, which will bring the total value of products covered by the duties to US$50 billion by the end of the month.
Wang also said the company had secured enough supplies including wafers and other materials to make sure its foundries are not affected by supply constraints in the second half amid rising demand from customers.
He also expected revenue to grow in the range of three to four percentage points quarter over quarter in the third quarter, and by 13 to 14 per cent year on year.
“Strong demand for microcontroller units, analogue and power management products will continue to drive ongoing business,” Wang said, adding the construction of a foundry in eastern China’s Jiangsu province was moving according to plan.
The initial phase will provide 40,000 wafer capacity per month and is expected to break even in the first year after operation kicks in, he said.