Fri, Mar 09, 2018 - Page 12 News List

Yageo expects profit trend to continue

MAJOR CHANGES:The passive components industry is shifting with a range of new applications driving the industry to a boom that is more diverse than that seen in 2000

By Lisa Wang  /  Staff reporter

Yageo Corp (國巨), the world’s biggest chip resistor supplier, yesterday posted a record-high net profit of NT$3.02 billion (US$103.2 million) for the last quarter, attributed to price hikes and growing demand for high-margin products for automotive and industrial devices.

Net profit was 2.46 times that of the NT$1.23 billion made the previous year and jumped 70.62 percent from NT$1.77 billion in the third quarter last year.

Yageo expects the uptrend to extend into this year and the next, buoyed by increasing demand for high-margin products used in electric cars, autonomous vehicles, industrial devices, premium smartphones and new applications, like virtual reality and artificial intelligence.

“The passive components industry is undergoing a major structural change,” Yageo chairman Peter Chen (陳泰銘) said at the company’s first-ever conference with investors.

INDUSTRY DRIVERS

“We see a diversity of new applications coming in to drive the industry’s growth. This is very different from the last boom in 2000, when growth was driven by just one application,” Chen said.

Another area of growth comes from the increased number of advanced chips and passive components required for existing electronic devices such as smartphones, Chen said, adding that an Apple Inc iPhone 8 or iPhone X is equipped with between 600 and 620 passive components, far more than the 420 units used in an iPhone 7.

Chen said he is optimistic about the fundamental change to the industry, which should stimulate demand for passive components and extend the upcycle for a much longer period.

His optimism is also based on disciplined capacity expansion by Yageo and its industry peers, Chen said.

“This time, no one wants to see gross margin crumble on irrational capacity expansion,” he added.

HIGH-END PRODUCTS

Since the fourth quarter of 2014, Yageo has spent NT$12 billion on capacity expansion for high-end and high-margin products to cope with rising demand.

Gross margin climbed to a record high of 43.7 percent last quarter, compared with 24.7 percent a year ago and 30.3 percent the previous quarter, the company’s financial statement showed.

Yageo attributed the improvement to increased product shipments for automotive and industrial devices. Passive components for hybrid cars cost two times more than traditional gas-fuelled vehicles, the firm said.

Yageo’s net profit for last year soared 88 percent to NT$6.66 billion, compared with NT$3.55 billion in 2016. Earnings per share rose to NT$15.64 from NT$6.14.

Revenue increased by 16.1 percent to NT$32.26 billion from NT$27.78 billion.

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