Tue, Dec 24, 2013 - Page 14 News List

K7 closure may affect GDP: MOEA

By Kevin Chen  /  Staff reporter

Advanced Semiconductor Engineering Inc’s (ASE, 日月光半導體) partial plant shutdown in Greater Kaohsiung would have a limited impact on the nation’s integrated-circuit packaging and testing industry, if the K7 plant can resume full operations within three months, Minister of Economic Affairs Chang Chia-juch (張家祝) said yesterday.

However, if sections of the K7 plant remain closed for more than three months, it would start to adversely impact the industry and negatively affect Taiwan’s GDP growth, Chang told the legislature’s Economics Committee.

“In the short term, [we] hope other domestic companies could take orders from ASE. However, if the shutdown lasts longer, it will have an increasingly negative impact on the country because orders could move overseas,” broadcaster Radio Taiwan International (RTI) yesterday quoted Chang as saying.

On Friday, the Greater Kaohsiung Government’s Environmental Protection Bureau ordered the K7 plant, in the municipality’s Nanzih Export Processing Zone, to shut down its wafer-related manufacturing facilities after the factory was found to be in violation of environmental protection rules by discharging wastewater contaminated with heavy metals into the nearby Houjin River (後勁溪).

ASE yesterday submitted an improvement plan to the bureau dealing with wastewater treatment at the K7 plant. The plan is to be assessed by a panel of experts and academics commissioned by the bureau.

The ministry will help the K7 plant to resume operations as soon as possible after it reviews the improvement plan, Chang said. If everything goes smoothly, the plant may resume operations in the next two to three months, he added.

ASE shares rose 2.39 percent to close at NT$27.9 yesterday on the Taiwan Stock Exchange, as investors took the partial shutdown as being a better result than expected, Yuanta Securities Corp (元大證券) analyst Andrew Chen (陳治宇) said yesterday in a client note.

“We believe ASE will pull all the necessary strings to resume production as soon as possible,” Chen said.

“ASE will also work very hard to contain this event,” to ensure that no subsequent investigations at its other factories in Taiwan reveal illegal wastewater disposal, he added.

ASE said on Friday the partial shutdown at the K7 plant may result in a monthly loss of up to US$18 million, adding that the plant accounts for about 9 percent of the company’s monthly sales.

Jih Sun Securities Co (日盛證券) analyst Joe Lai (賴暉明), said the impact of the short-term plant shutdown was factored in to ASE’s share price last week and investors may begin buying the company’s shares again in view of its improved outlook.

Jih Sun forecast ASE to report a sequential 8.82 percent increase in this quarter’s sales, despite the short-term impact of the K7 issue, Lai said in a research note.

The company reported record-high consolidated sales for the third quarter of NT$56.75 billion, an increase of 11.8 percent from the second quarter and 15.8 percent from a year earlier, company data showed.

“ASE is looking to grab lucrative opportunities in mobile devices and wearable applications through the system-in-packaging (SiP) business. The company has no visible competitors in the SiP market in either Taiwan and China. It’s only competition is in Japan,” Lai said.

However, KGI Securities Co (凱基證券) analyst Bonny Weng (翁筱雯) cautioned investors against reading too much into a single day’s trade, saying that they should wait until the wastewater issue comes to an end.

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