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Apple supplier TPK sees rosy quarter on good iPhone demand

Taiwanese touch module maker expects 25-30% sales rise quarter-on-quarter

TPK Holding’s CFO Freddie Liu says the second half of 2017 looks bright for the company.

TAIPEI -- Taiwan's TPK Holding, a key Apple touch module supplier, on Wednesday said it expects strong demand for iPhones to boost the current quarter.

Chief Financial Officer Freddie Liu said the company has started to manufacture touch module components for "the new product in the second half of 2017" in June and mass production continues into the current quarter.

Liu did not name Apple explicitly, but he was most likely referring to the new iPhone range expected to hit the shelves in September.

"The outlook for the second half of 2017 looks very healthy, and our revenue would grow year-over-year in every quarter this year," said Liu.

In view of this, Liu said TPK would likely meet analysts' expectation of 25- 30% quarter-on-quarter growth in July-September.

That represents revenue of 28 billion New Taiwan dollars ($926.5 million) to NT$29.12 billion for the current quarter, or a 7-11.2% rise from a year ago.

Apple is TPK's biggest customer that accounts for more than 50% of its revenue. The Taiwanese company mainly supplies touch modules for Apple Watch, iPad, 3-D touch modules for iPhones, and the touch bar for MacBook Pro.

Liu's optimistic remarks are in line with Apple's solid guidance on Aug. 2 for the current quarter, which pushed the U.S. tech titan's shares to a record high.

In the April-June quarter, a traditionally slow season for smartphone sales, TPK's revenue increased 31% year-on-year to NT$22.4 billion thanks to impressive demand for the new iPad that launched this spring.

The company also swung back to black with a net profit of NT$327 million, from a net loss of NT$2.49 billion a year ago.

TPK attributed its annual loss last year to serious inventory adjustment in the first half of 2016 and a poor yield rate in making touch modules for Apple Watch and Macbook Pro.

Yield rate is measured by the quantity of usable or saleable units from each batch of components at the end of a manufacturing process.

Michael Chung, chief executive of TPK, said his company no longer had any yield rate problems and an increasing use of automation may help boost its production efficiency.

TPK's shares closed 1.95% higher at NT$104.5 on Wednesday ahead of the earnings announcement. They have surged by more than 76% so far this year.

The touch module maker's major rival General Interface Solution, a subsidiary of key iPhone assembler Hon Hai Precision Industry, has seen its stock price soar more than 225% so far in 2017.

Boyce Fan, an analyst at Taipei-based WitsView, said the outlook for both companies is good because they charge $17-19 for each 3-D touch module component for the upcoming iPhone, compared with just $10 for previous models.

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