The memory shortage has been reported mostly as a windfall for DRAM sellers and a headache for PC makers. Denso’s half-year results show what it looks like several steps down the chain, at a company that makes no chips at all.
Revenue up, operating profit down by a fifth
For April through September, revenue rose 7.0 percent to JPY 3.8436T, or about $24.4B. Operating profit fell 19.5 percent to JPY 170.1B and interim net profit dropped 8.8 percent to JPY 119.8B, both under IFRS.
Higher component costs cost the company JPY 97B. Semiconductor memory accounted for roughly JPY 44B of that, with copper and aluminum doing much of the rest. Wage increases including across suppliers added JPY 27B, forward development JPY 16B and one-off items JPY 38B. Cost reduction and better factory utilization clawed back JPY 117.7B, and a weaker yen at around 159 to the dollar, versus 146 a year earlier, added JPY 28B. It was not enough.
The pass-through argument has not been won
Chief financial officer Seiji Maeda said at a briefing that the jump in memory component prices is having a very large impact, and that metals and resins remain elevated, with Middle East tensions keeping pressure on supply. The company is seeking price pass-through from automakers.
China is the other soft spot. Maeda called domestic demand there weak and said Denso will consolidate manufacturing bases.
Electrification was the bright side, with electric product revenue up 9.7 percent. To cushion the profit decline, Denso announced a buyback of up to JPY 200B and the cancellation of 400 million treasury shares, keeping the dividend at JPY 74 a share. The stock rose about 2 percent.
