Himax expects Q1 to be revenue trough of the year

The company said, "Historically, the first quarter has seasonally been the slowest of the year due to the Lunar New Year holidays. On the backdrop of sluggish global demand and a surge of Covid-19 cases in China despite their government lifting Covid restrictions, many Chinese factories extended their shutdown period through the Lunar New Year. This added uncertainty to an already stagnant business environment causing Company’s customers to hesitate to place new orders, while cautiously managing their inventory levels and further clouding Company’s business visibility. As uncertainty persists, Himax’s objective first and foremost is to strictly manage its inventory level, and the Company has been aggressive in doing so by sacrificing short term gross margin to offload excess stock. Himax also continues to curtail its wafer starts while striving to win more projects from customers specifically for the purpose of digesting Company’s excess inventory. Himax’s inventory position has much improved since its peak during the third quarter last year and the Company anticipates it will continue to decrease to near its historical average no later than the third quarter of 2023. With that said, Company’s Q1 gross margin remains under pressure. The cost of Company’s excess inventory is high from being sourced during tight capacity constraint in 2021 when foundry and backend prices were at peak levels. Another contributing factor to Q1 margin contraction stems from market price decline of certain unsold inventories which will necessitate write-downs. However, Himax believes this effect will gradually diminish throughout the year as the market has shown signs of recovery across many business areas. Notwithstanding the pressure from the destocking process, Himax continues to work diligently towards improving its gross margin as a primary objective. Despite the expected short-term margin compression, Himax remains confident in its gross margin prospects, backed particularly by several high visibility product areas, most notably the higher margin automotive and WiseEye smart image sensing businesses which look set to outgrow other businesses. Looking ahead, the semiconductor industry appears to be trending toward a post-pandemic era. While the supply chain gradually stabilizes and channel inventory reverts to heathier levels, Himax believes a decent recovery is forthcoming. On the revenue front, the Company expects the first quarter to be the trough of the year with sales rebounding in the second quarter and business momentum continuing to improve into the second half of 2023."