Sat, Jan 24, 2009 page12

• Vanguard posts first quarterly loss in years

  TROUGH The Hsinchu-based chipmaker told investors that this year’s first quarter would likely be the low point of the economic downturn, with things set to improve

  • By Lisa Wang and Kevin Chen / STAFF REPORTERS
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  Vanguard International Semiconductor Corp (世界先進), which makes chips used in liquid-crystal-display (LCD) panels, yesterday posted its first quarterly loss in more than six years as the global economic recession hurt demand.

  However, the Hsinchu-based chipmaker told investors that the first quarter was likely to be the trough, matching comments that parent company Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) made the previous day.

  TSMC, which holds a 36 percent stake in Vanguard, told investors on Thursday that its business may hit bottom this quarter.

  “The operation will remain weak in the upcoming three months, but there is slim likelihood of seeing further declines after the two-quarter slump,” Vanguard chairman Lin Chuan (林全) told ETTV news channel.

  In the fourth quarter of last year, Vanguard posted losses of NT$526 million (US$15.56 million), or NT$0.3 per share, compared with net profits of NT$1.18 billion or NT$0.68 per share a year ago and NT$326 million or NT$0.19 per share in the third quarter of last year, a company statement said.

  The last time Vanguard posted quarterly losses was in the first quarter of 2003, during which it lost NT$740 million.

  “Due to the persistent economic slump globally, customers were conservative about demand,” company spokesman Robert Hsieh (謝徽榮) said in a statement.

  Shipments may be halved in the first three months of this year, compared with 162,000 wafers shipped in the fourth quarter of last year, Hsieh said.

  Reflecting falling demand, factory usage may fall to 25 percent in the first quarter, compared with 46 percent in the fourth quarter of last year.

  The gross margin may deteriorate fast to between minus 65 percent and minus 69 percent this quarter, from minus 9.6 percent last quarter, Hsieh said. Average selling price may slide by low single-digit percentage points from the previous quarter, he said.

  Revenues in the fourth quarter declined 38 percent to NT$2.68 billion from the third quarter of last year, he said.

  Revenue from chips used in PCs fell to about 37 percent of the chipmaker’s total revenues last quarter mainly because of sluggish demand for the driver ICs used in computer panels as customers digested inventory, the statement said.

  For the full year last year, Vanguard’s earnings plunged 76 percent to NT$1.04 billion from NT$4.32 billion in 2007. Revenues slid slightly by 1 percent to NT$16.12 billion last year, from NT$15.97 billion in 2007.

  Commenting on Vanguard’s fourth-quarter figures, a Citigroup analyst said the company’s NT$0.3 loss per share and its operating margin of minus 21 percent for the fourth quarter were better than the market expected.

  But Andrew Lu (陸行之), an analyst with Citigroup Global Markets in Taipei, said the company’s first-quarter guidance on wafer shipments, average selling price and factory utilization were worse than what TSMC provided on Thursday.

  Especially, Vanguard’s gross margin guidance of a minus 65 percent to minus 69 percent in the first quarter could imply an “operating margin of negative 90 percent, if operating expenses cannot be cut in-line with order cuts,” Lu said in a client note yesterday.

  Despite the dire near-term figures for the company, “We expect the trough to pass soon as the LCD sector is showing some signs of life,” Lu wrote, attributing his optimism to the sign that inventory cuts on LCD driver ICs are emerging and to the relatively low valuation of Vanguard shares compared to those of its loss-making peers.
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