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Vanguard's net income surges

Vanguard International Semicon-ductor Corp (世界先進), one of the nation's leading contract chipmakers, said yesterday that third-quarter net income grew 35 percent from a year ago, driven by recovering demand for its chips used in flat panels.

The chipmaker said it expects growth momentum to extend into the first quarter of next year on new orders.

"We expect next year will be a good year," Vanguard president Hsu Chung-shi (徐中時) told an investor conference yesterday.

During the period from July to last month, net income grew to NT$1.22 billion (US$37.64 million), or NT$0.71 a share, from NT$905 million, or NT$0.54 a share, a year earlier.

"As the third quarter is a traditional peak season, it was difficult for us to satisfy customer demand," Hsu said.

Vanguard, in which Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) owns a 36.8 percent share, generated 60 percent of revenues totaling NT$4.21 billion last quarter from chips for flat panels. Around 13 percent of the figure came from TSMC's orders.

"As we are seeing strong demand for chips used in flat panels in the fourth quarter, we will start to make chips from a factory purchased from Winbond Electronics Corp (華邦電子) this quarter, ahead of the transaction in January," Hsu said.

Equipment will be fully utilized this quarter, he said.

The addition of the Winbond factory would help Vanguard boost its shipment by between 6 percent and 9 percent this quarter from 233,000 wafers last quarter, he said.

However, Hsu expects gross margin to slide slightly to between 39 percent and 41 percent this quarter from 42 percent last quarter as a result of increased price pressure. Prices may drop by a low to mid single digit percentage quarter on quarter, he said.

Based on Hsu's comments on the fourth quarter, Rick Hsu (徐稦成), a semiconductor analyst with Nomura Securities Co in Taipei, said: "The forecast gross margin decline is bigger than I thought. The impact of currency exchange and additional costs from using Winbond's equipment is unexpected."

Hsu has estimated that Vanguard's gross margin will rise to 43 percent from 42 percent in the third quarter.

Separately, Vanguard vice president Robert Hsieh (謝徽榮) said spending on new facilities and equipment for next year would be lower than this year's NT$11 billion to NT$12 billion. Hsieh said the chipmaker plans to start building a new factory by the end of the year, but would limit spending in the initial stages of construction.

Vanguard has not decided whether the new plant will make 8-inch or 12-inch wafers, he said.

Shares of Vanguard fell 1.19 percent to NT$28.95 on the GRETAI Securities Market yesterday, underperforming the broader market's 1.85 percent gain.
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