GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, on Thursday said that it expects the inventory corrections of its clients to carry over into the second half of next year given sluggish demand for end products and macroeconomic uncertainties stemming from the US-China trade dispute.
To cope with the longer-than-expected industry slump, GlobalWafers said it plans to push back the production of a new fab in South Korea by three or four months, the firm told an investors’ teleconference.
GlobalWafers set the new fab’s production target at 150,000 advanced wafers per month by the end of next year, rather than at the end of the third quarter of next year as previously planned, it said.
The Hsinchu-based wafer supplier said it has encountered unexpected headwinds and challenges from macroeconomic uncertainties, trade tensions and customer inventory adjustments over the past few quarters.
“Those uncertainties and challenges are not over yet,” GlobalWafers chairwoman Doris Hsu (徐秀蘭) said. “Uncertainty and the softness in demand continue, while business visibility is still low.”
GlobalWafers has seen demand pick up slowly for advanced 300mm wafers, while demand for 200mm and 150mm wafers remains soft, Hsu said.
“This is a very, very early stage of market recovery,” she said. “I think the market recovery will be more solid and customers might be more willing to sign agreements to secure future supply by the end of 2020.”
No clients are in discussions with the company to sign new wafer supply agreements, except those for 300mm wafers and special wafers, she said.
Clients now tend to sign new supply agreements that last two or three years, rather than five-year contracts as they did previously, Hsu said, adding that they are also less willing to make big prepayments.
This quarter, GlobalWafers expects pressure to increase on shipments as clients seek to cut inventory levels toward the end of the year, she said.
Being at the front end of the semiconductor supply chain, GlobalWafers expects its own recovery to start later than its clients, Hsu said, adding that some clients gave a positive outlook for next year.
Net profit last year was the lowest in six quarters at NT$3.33 billion (US$109.5 million), down 8.4 percent from NT$3.63 billion in the third quarter of last year, it said.
That represented a sequential reduction of 5.93 percent from NT$3.54 billion.
Earnings per share dropped to NT$7.64, down from NT$8.31 a year earlier and NT$8.15 in the prior quarter.
Gross margin fell to 37.8 percent, from 39 percent a year earlier and 41 percent a quarter earlier, due to lower wafer prices and decreased factory utilization as it sought to reduce inventory, GlobalWafers said.
“With the longer-than-expected inventory digestion time for GlobalWafers’ clients and schedule delays for its [South] Korea Fab, we expect its share price to pull back and suggest waiting for a better long-term entry point,” Yuanta Securities Investment Consulting Co (元大投顧) said in a report.
Yuanta trimmed its 12-month price target for GlobalWafers to NT$345 from NT$330, implying a 9 percent downside.
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