IMOS Q3 2025: Memory Revenue Jumps 48.9% as Utilization Recovers, Margin Pressures Persist

2025-11-11 | By EarningsIQ Research

Memory segment strength drove IMOS’s third-quarter recovery, but cost inflation and uneven demand in consumer and display ICs continue to weigh on margin structure. Management signals a cautious but constructive outlook for 2026, with selective capacity investment tied to long-term customer contracts and a focus on high-growth logic and memory test services. Investors should watch for sustained pricing power and cost control as the company navigates industry volatility and capital allocation discipline.

Summary

• Memory Product Outperformance: Memory revenue surged, offsetting persistent weakness in consumer and display IC segments.
• Cost Structure Headwinds: Electricity and material costs escalated, compressing margins despite improved utilization rates.
• 2026 Capacity Discipline: Management prioritizes selective expansion and long-term contracts to balance growth and risk.

Performance Analysis

IMOS delivered a sequential revenue increase of 7.1% in Q3 2025, with memory product demand recovering and driving overall top-line growth. Net profit improved by 12.4% quarter-on-quarter, reflecting a more favorable product mix, especially in memory and related test services. Utilization rates rebounded across core segments: memory and mixed-signal test operations reached about 70%, and overall average utilization was 66%, up from prior quarters. Segment analysis shows memory products now comprise nearly 30% of sales, with DRAM and SRAM contributing 18.5% and NAND Flash showing strong year-over-year gains.

However, display driver IC (DDIC) and metal part revenues remained soft, with automotive and consumer panel demand unable to compensate for broader mid-range consumer electronics weakness. The company’s operating margin benefited from the product mix shift but was pressured by rising electricity and material costs, which increased by NT$80 million and NT$13 million respectively versus the previous quarter. Capital expenditure was tightly managed, with investments focused on memory and mixed-signal test capacity.

• Memory Revenue Acceleration: Memory sales rose 48.9% year-over-year, now accounting for nearly a third of total revenue.
• Utilization Rate Recovery: Memory and mixed-signal test utilization climbed to roughly 70%, supporting operating leverage.
• Cost Inflation Drag: Electricity and material costs rose sharply, partially offsetting margin gains from improved mix.

While the quarter marked a clear operational recovery in memory, margin expansion remains constrained by input cost volatility and uneven demand across end markets.

Executive Commentary

Strategic Positioning

1. Memory and Mixed-Signal Test as Growth Engines

IMOS is doubling down on memory and mixed-signal test services, which saw both utilization and revenue growth this quarter. The company’s focus on DRAM, NAND Flash, and emerging DDR5 modules positions it to capture demand from AI data centers and edge device proliferation. This segment now represents the core of IMOS’s growth thesis, with management citing stable demand and customer storage recovery as key tailwinds.

2. Selective Capacity Expansion and Customer Alignment

Management signaled disciplined capital allocation for 2026, emphasizing capacity additions only where long-term customer contracts and clear demand visibility exist. This approach aims to avoid overextension in volatile markets and supports sustainable returns on invested capital. New investments are concentrated in memory and high-end logic testing, with a measured approach to display and consumer ICs.

3. Cost Control and Margin Management

Rising input costs—especially electricity and materials—were called out as major headwinds this quarter. IMOS is actively pursuing cost control measures, including operational efficiency improvements and product quality initiatives, to protect margins. The ability to pass through cost increases to customers and maintain pricing power will be pivotal as industry inflation persists.

4. Diversification into AI and Smart Devices

Expansion into AI-related applications, power management ICs, and smart device logic is a strategic priority. The company is leveraging its MAPS and TV SOC test capabilities to enter new verticals, seeking to diversify revenue streams beyond traditional consumer electronics.

Key Considerations

This quarter’s results highlight a business at an inflection point, balancing strong memory recovery with persistent cost and demand challenges in other segments. Investors should weigh the following:

Key Considerations:

• Product Mix Shift: Memory and mixed-signal test now anchor growth, but legacy display and consumer ICs remain under pressure.
• Margin Sensitivity: Cost inflation, especially in electricity and materials, is compressing margins and requires active management.
• Capital Allocation Discipline: Management’s focus on expansion tied to long-term contracts reduces risk but may limit upside if demand surges unexpectedly.
• Customer Concentration: Growth is increasingly tied to a handful of strategic customers and the AI/cloud verticals.

Risks

Cost volatility and uneven end-market demand remain the most material risks for IMOS. If electricity or material costs accelerate faster than pricing power, margin recovery could stall. Exposure to cyclical memory markets and concentration in a few growth verticals amplify operational risk. Management’s cautious capacity expansion mitigates some risk but may also cap upside if industry demand inflects sharply.

Forward Outlook

For Q4 2025, IMOS expects:

• Stable memory segment performance, supported by AI data center and edge device demand
• Continued cost pressure, particularly from electricity and materials

For full-year 2025, management maintained a cautious outlook:

• Selective capacity additions tied to long-term customer contracts

Management highlighted several factors that will shape results:

• AI and edge device proliferation driving memory and logic IC demand
• Ongoing focus on cost control and operational efficiency to support margin structure

Takeaways

IMOS’s Q3 2025 results underscore a strategic pivot toward memory and high-growth test services, with disciplined investment and cost management taking center stage.

• Memory-Led Recovery: Memory revenue and utilization rates are the primary growth drivers, but margin gains are at risk from input cost inflation.
• Strategic Discipline: Management’s selective capacity expansion and focus on long-term contracts provide downside protection but may limit rapid upside capture.
• Future Watch: Investors should monitor cost trends, pricing power, and the pace of diversification into AI and smart device segments for signs of sustainable growth.

Conclusion

IMOS’s Q3 2025 marks a clear memory-driven rebound, but the company’s ability to sustain margin improvement will hinge on cost control and execution in new growth verticals. Disciplined expansion and customer alignment position the business well for a cautious but constructive 2026.

Industry Read-Through

The pronounced rebound in memory demand and utilization at IMOS signals a broader industry recovery in DRAM, NAND Flash, and memory test services, especially as AI and edge computing drive new workloads. Cost headwinds from electricity and materials are not unique to IMOS, suggesting ongoing margin pressure across the OSAT (outsourced semiconductor assembly and test) and memory supply chain. Companies with disciplined capital allocation and strong customer alignment will be best positioned to capture the next cycle, while those exposed to consumer and display ICs may continue to lag.

IMOS Technology Semiconductors Memory CostInflation CapitalExpenditure Utilization