ASM International reported mixed third-quarter results as the firm is feeling the effects of a cyclical slowdown in the chip equipment industry. For the quarter, revenue was EUR 409 million, up 8% sequentially, and an increase from sales of $376 million in the year-ago quarter.
However, orders fell to EUR 274 million from EUR 420 million in the second quarter. In the firm’s front-end segment, which supplies manufacturing equipment to chipmakers for fabricating circuits on semiconductor wafers, bookings fell 25% to EUR 64 million as customers have paused capital investments in response to the uncertain near-term outlooks for the semiconductor market and global economy.
ASM’s back-end chip packaging equipment unit saw orders fall 21% to EUR 173 million during the same period, and is facing similar headwinds to the front-end segment. In addition to chip packaging tools, the back-end is a key supplier of packaging equipment for light-emitting diodes (LEDs), and this business is also seeing lower near-term demand from LED manufacturers.
On the profitability front, gross margin came in at 30.6%, down from 34.6% in the second quarter, due to lower business levels in the front-end and back-end segments, as well as some pricing pressure and unfavorable product mix in the back-end unit. Operating income came in at $32 million, versus $39 million last quarter.
For the fourth quarter, management expects double-digit sales declines in both ASM’s front-end and back-end businesses as the cyclical slowdown in industry conditions will likely continue. The firm indicated that it will embark on a cost reduction program in the front-end segment, particularly on the manufacturing side, in an effort to boost profitability.
On a brighter note, management noted that it expects strong front-end orders next quarter, as some key customers, including Intel INTC , prepare to migrate to moreadvanced semiconductor fabrication processes next year. Although the overall business environment will be weak for ASM in the coming months, these technology investments could provide some near-term positives for the firm.
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