Vanguard International Semiconductor Corp (VIS, 世界先進) yesterday raised its capital spending projection for this year by 38 percent to finance new technology development after reporting a strong quarterly growth in net profit last quarter.
Vanguard, which makes power management ICs and controller chips for LCD panels, said it would spend NT$1.8 billion (US$55.62 million) on new equipment and facilities this year, compared with a previous estimate of NT$1.3 billion.
“This is a medium and long-term investment. We are investing in new technologies to explore new chips that can be made on our 8-inch wafer factories in the next five years to 10 years,” Vanguard chairman and president Leuh Fang (方略) said.
Vanguard plans to arrange for an unspecified equity investment in an overseas company to collaboratively develop this new technology to make new-generation power management chips.
The new power management ICs will deliver high margins for the firm, Fang said.
Power management ICs are the largest revenue contributor for Vanguard, accounting for 45 percent.
Vanguard operates two 8-inch wafer fabs and one 12-inch.
In the quarter that ended on March 31, Vanguard’s net profit soared 54.7 percent to NT$1.35 billion, or NT$0.83 per share, compared with NT$875 million in the previous quarter, thanks to resilient inventory restocking by clients.
Last quarter’s figure surpassed HSBC Holdings PLC analyst Steven Pelayo’s estimate of NT$1.28 billion and Yuanta Securities Investment Consulting Co (元大投顧) analyst George Chang’s (張家麒) forecast of NT$1.33 billion.
Gross margin climbed to an eight-quarter high of 35.2 percent last quarter, driven by better utilization and exceeding the firm’s own projection of 33.5 percent.
Vanguard expects the growth momentum to carry into this quarter.
“Customer demand for the company’s wafers is increasing slightly in the second quarter. We have two months of order visibility, but the strength will be weaker than in the first quarter,” Fang said.
He said that he was “cautiously neutral” about the operations in the second half of the year as visibility is vague due to unclear movement of the US dollar, slowing economic growth in China and in emerging countries such as Brazil and Russia.
Gross margin is expected to stay at between 33.5 percent and 35.5 percent this quarter, while revenue could be flat or increase by up to 4.5 percent to between NT$6.2 billion and NT$6.5 billion from last quarter’s NT$6.22 billion, the firm said.
Customers’ restocking demand for controller chips used in mid-to-low-end smartphone panels and PC panels as well as rising demand for power management ICs will continue to drive operations going forward, Vanguard vice president D.L. Tseng (曾棟樑) said.
Rising demand will also boost the equipment loading rate by several percentage points, he said, without giving exact figures.
Chang was optimistic about Vanguard’s prospects.
“After all, even if we assume a flatter second half, we project VIS can still post a record EPS of NT$3.5 this year, which is already considered excellent in this environment,” he wrote yesterday in a client note.
Shares of Vanguard yesterday rose 1.43 percent in Taipei trading to close at NT$49.75.
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