Results for the six months ended December 31, 2004

Results for the six months ended December 31, 2004

Results for the six months ended December 31, 2004

Q. You had a very healthy gross profit margin of 61% in the first half of FY2005. But now that you are aggressively ramping up production in China, there will be many copy-cat competitors there who can hire your key China staff, build 10 times the scale and charge half the price. How is MM going to deter such competitors from joining the game and protect its gross profit margins?
Q. MM has shown encouraging progress in building its encapsulation range of products, as revenue has increased from $64,000 to $96,000. What are the key steps for technical capability and customer qualification for the encapsulation process? Where is MM right now, and how long will it take the company to acquire full encapsulation process and technical capability?
Q. MM’s Custom Machining & Assembly (CMA) division has made good progress. Has MM been exploring business outside the semiconductor industry? Are there any internally set targets for obtaining initial orders from the medical, instrumentation, or other industries?
Q. A large portion of MM’s fixed costs is on personnel. Besides a headcount freeze, are there any plans to manage and reduce fixed costs?
Q. MM’s exchange rate loss ballooned 226%. Is this is for sales to US customers? How is MM going to manage this exchange rate exposure for future businesses?
Q. Do you foresee the trend of high capital expenditure ($3 to $5 million) to continue once the China plant investment is in place?

Q. You had a very healthy gross profit margin of 61% in the first half of FY2005. But now that you are aggressively ramping up production in China, there will be many copy-cat competitors there who can hire your key China staff, build 10 times the scale and charge half the price. How is MM going to deter such competitors from joining the game and protect its gross profit margins?

A. Competitive risks are a major concern for most companies setting up in China. However, competition is a fact of business life and, when viewed positively, provides the incentive to improve company performance. As a general approach, we believe there is no short cut to long-term success. This applies to Micro-Mechanics, as well as our competitors. Rather, success (and competitiveness) stems from consistent and persistent improvement in quality, cost, cycle time and service. When combined with well-engineered products that meet customer requirements, we think there will be market share opportunities for Micro-Mechanics in China and throughout the world. At the same time, we are taking practical approaches in China, such as ensuring veteran personnel hold key management positions and limiting access to our know-how, to minimize competitive risks.

Back to top

Q. MM has shown encouraging progress in building its encapsulation range of products, as revenue has increased from $64,000 to $96,000. What are the key steps for technical capability and customer qualification for the encapsulation process? Where is MM right now, and how long will it take the company to acquire full encapsulation process and technical capability?

A. Unlike our current products for die-attach and wire-bonding, the consumable tools required in the encapsulation process require primarily fine grinding and EDM manufacturing techniques. In addition to lengthy customer qualification periods, our biggest challenge is to develop these manufacturing capabilities. Although it is difficult to provide a specific time line, our aim is to develop a comprehensive product range. When combined with the wide range of products from our existing die-attach and wire-bond businesses, we would like to be one of the few companies that can offer an integrated solution for the semiconductor assembly and test processes.

Back to top

Q. MM's Custom Machining & Assembly (CMA) division has made good progress. Has MM been exploring business outside the semiconductor industry? Are there any internally set targets for obtaining initial orders from the medical, instrumentation, or other industries?

A. During our first full year for CMA in FY2004, we recorded sales of about $500,000. During the first six months of FY2005, CMA sales exceeded $700,000. While we are encouraged by this sales growth, our primary aim presently is to build capability and explore opportunities in the medical, instrumentation or other industries that require precision components and assemblies. Recently, we received a first order to manufacture components for a company manufacturing laser equipment.

Back to top

Q. A large portion of MM's fixed costs is on personnel. Besides a headcount freeze, are there any plans to manage and reduce fixed costs?

A. We intend to continue our approach to building a sensible expense structure. Recently, for example, we introduced internet-based telephony. In less than six months, we reduced our overseas telephone costs by over 50%. Together with our "hawker-style" approach to keeping things simple - and a constant focus on quality, cost and operational improvements - we believe the key to keeping costs low is more about operating style and culture than accounting control.

Back to top

Q. MM's exchange rate loss ballooned 226%. Is this is for sales to US customers? How is MM going to manage this exchange rate exposure for future businesses?

A. During 1H2005, we had a foreign exchange loss of S$129,000, representing about 1% of sales. While using hedging techniques is something we are exploring, we feel our business approach to invoicing in local currencies (S$, M$, Peso, Baht, Yen, US$ and RMB), together with our diversified cost base, will be the most effective strategy for us to maintain such exposure at a manageable level.

Back to top

Q. Do you foresee the trend of high capital expenditure ($3 to $5 million) to continue once the China plant investment is in place?

A. During FY2005, we expect total capital expenditures, including outlays for our new plant in Suzhou, China, to be in this spending range. Although we have not finalized our investment plans for FY2006, we intend to watch capital spending carefully since these have a direct and significant impact on cash flow and earnings.

Back to top

Back

Feel free to contact us for any enquiry

Email us with any questions or inquiries. We would be happy to answer your questions and set up a meeting with you.

Contact Us

如有任何'问,请随时与'们联系

如有任何问题或'问,您可通过电子邮件方式联系'们。 '们很乐意回答您的问题并与您安'会议。