Vanguard’s profits drop as selling prices reduce

UNSCATHED::Vanguard has seen its net income fall, but its president remains optimistic because future demand for driver technology looks robust and share prices have risen

By Crystal Hsu  /  Staff reporter

Tue, Feb 05, 2013 - Page 14

Foundry operator Vanguard International Semiconductor Corp (世界先進) yesterday posted NT$739 million (US$25 million) in net income for last quarter, down 17 percent from the previous quarter, as lower selling prices and a stronger local currency weakened the company’s profit.

The Hsinchu-based company, in which Taiwan Semiconductor Manufacturing Co (台積電) owns a 39 percent stake, expects wafer shipments to flatten this quarter, while its profit margin may drop 2 percent to 4 percent as seasonal inventory corrections pan out, president Fang Leuh (方略) said.

The results translated into NT$0.47 earnings per share (EPS) in the fourth-quarter, raising full-year profits by 164 percent to NT$2.33 billion last year with EPS standing at NT$1.48, company data showed.

The company’s revenue grew by 1 percent during last year’s October-to-December period to NT$4.75 billion on the back of stronger demand for chips used in television, handset and tablet panels, Fang said.

A total of 371 million wafers were shipped last quarter, compared with 350 million three months earlier, lifting the utilization rate by 3 percentage points to 87 percent, he said.

However, blended average selling prices shed 2 percent in the quarter, pushing the gross margin down to 25 percent, from 28 percent, Fang said, adding that the 2.5 percent increase in the New Taiwan dollar against the greenback also weighed down on profitability.

With two-month order visibility, Vanguard said it may emerge from the low season this quarter unscathed, Fang told investors at a conference in Taipei.

Wafer shipments may stay flat or down slightly this quarter, compared with last quarter while the fab utilization rate may climb to a range between 94 percent and 96 percent, he said.

“Some customers are scaling back inventory levels, but others are building up stock,” Fang said.

As a result, gross margin may reverse the downtrend this quarter, improving from 27 percent to 29 percent, even though blended selling prices are likely to decrease by 2 percent from last quarter, Fang said.

Capital expenditure may reach NT$1.2 billion this year, with NT$500 million set aside for this quarter, he said.

The forecast represents an 18.9 percent reduction from last year at NT$1.48 billion.

Driver technology underpinned 59 percent of the company’s revenue last year with demand looking robust ahead, Fang added.

Shares in Vanguard inched up 0.9 percent to NT$22.3 at the close of trading yesterday, slightly higher than the TAIEX’s 0.86 increase, according to Taiwan Stock Exchange data.