Results for the three months ended March 2009 (3Q09)
Q. How much of the decline in revenue in 3Q09 was due to lower selling price and volume respectively?
A. The decrease in Group revenue in 3Q09 was to a large extent caused by a sharp slowdown in order flows from customers as a consequence of the depressed business conditions in the global semiconductor industry. While there has been some price attrition for some of our consumable tools and parts, the effect is not substantial as our customers place greater importance on short delivery lead time over price.
Over the years, we have worked tirelessly to improve our product quality and cycle time. Our operating model is to offer customers a well-engineered product at a fair price and short turnaround time. We believe this value proposition has enabled Micro-Mechanics to gain considerable competitive edge in the semiconductor tooling segment.
Back to topQ. Have any of your customers decided to internally manufacture semiconductor tools during this period?
A. Many companies have downsized their operations in response to the weak market environment, but we have not witnessed this trend of in-house manufacturing of semiconductor tools amongst our customers.
As we have accumulated significant expertise and efficiency in the design and manufacture of precision tools, we find that customers would rather obtain their supplies from us than manufacture in-house. We are working even more closely with our customers during this period to understand their current requirements pertaining to price and other aspects, as well as explore opportunities for tooling products in new areas such as solar cells.
Q. Who are the major customers of the CMA business in the USA? Are the products mainly capital equipment or consumables?
A. Many of the customers that we serve are large and public corporations. About 90% of the products of our CMA operations in the USA are related to capital equipment for various sectors such as aircraft, wafer fab and disk drive industries. After securing a multi-year order of US$2 million for precision aircraft components, we have recently received a volume order for a consumable surgical tool which has good potential for repeat orders.
Q. Having achieved S$790,000 of cost savings in 3Q09, do you expect these savings to extend into 4Q09 and beyond?
A. A major portion of the cost savings in 3Q09 was related to personnel expenses. During the quarter, we asked our people at all levels (led by a voluntary base-pay reduction of 40% by CEO) to help lower costs through a combination of pay, benefits and working-hour reductions. We are continuing to keep a close watch on our cost base to bring it in line with the current business environment. However, when business starts to recover, our personnel expenses will adjust in tandem with the level of orders and production.