Vanguard International Semiconductor Corp (世界先進) yesterday said it has agreed to acquire an 8-inch fab in Singapore from GlobalFoundries for US$236 million, in a bid to solve prolonged supply constraints.
Vanguard said that for the past two years, it has been looking to acquire an 8-inch facility or manufacturing equipment to boost its wafer supply.
“The deal will allow Vanguard to secure new capacities and ensure the company’s future growth,” Vanguard chairman Fang Leuh (方略) told investors.
“Since 2018, we have been scouting ways to add new capacities, as the company’s three existing fabs are already fully utilized. It is not easy to acquire 8-inch facilities and manufacturing equipment,” he said.
Vanguard said that cost is a crucial factor in the acquisition. The US$236 million outlay is only one-third of the US$630 million it would have spent to build a new fab.
Besides, Singapore is one of the best venues to operate a semiconductor fab, given its stable economic and political conditions, Fang said, adding that it is likely to be immune to the impact from US-China trade tensions.
The fab could contribute about NT$5 billion (US$162.65 million) a year to its revenue, Vanguard said.
The acquisition would boost its 8-inch wafer capacity by 5 percent, or 40,000 wafers, per year after the transaction is completed on Dec. 31, Vanguard said.
Aside from the acquisition, Vanguard plans to increase its capital spending by 80 percent to NT$3.95 billion this year to expand its fabs’ capacity.
The chipmaker made the announcement after reporting its strongest quarterly net profit in about a decade, driven by robust demand for driver ICs used in TV and PC panels.
Net profit for last quarter soared 58.2 percent to NT$1.93 billion, compared with NT$1.22 billion in the corresponding period in 2017, a the company said in a statement.
That also represented a quarterly growth of 15.57 percent from NT$1.67 billion.
Vanguard expects demand to slow this quarter, reversing an uptrend that lasted for several quarters, as clients digest inventory.
“Order visibility is about two-and-a-half months,” Fang said. “We are cautious and conservative about this year’s business outlook, given weakening global GDP growth and uncertainty stemming from the US-China trade conflict.”
Revenue is expected to drop between 8 percent and 13 percent to between NT$6.7 billion and NT$7.1 billion this quarter, compared with a record NT$7.71 billion last quarter, the company said.
Gross margin is forecast to fall to between 34.5 percent and 36.5 percent, from 38 percent last quarter.
Demand for driver ICs used in consumer electronics, such as TVs and smartphones, would be the hardest hit, Vanguard sales department vice president Thomas Chang (張東隆) said.
The bright spot would be chips, especially power management chips, used in 5G-related devices and base stations, as global telecom operators are accelerating 5G network deployment, Chang said.
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