Vanguard International Semiconductor Corp (世界先進) yesterday slightly trimmed capital expenditures for this year to less than NT$10 billion (US$317.3 million), as customers became more conservative about inventory buildup due to sagging end product demand.
Vanguard, which makes power management chips and driver ICs used in flat panel displays, three months ago said it planned to spend NT$10 billion on new facilities and manufacturing equipment.
About 60 percent of it was earmarked for capacity expansion at its Singapore plant, which has eight-inch fabrication capabilities.
Photo: Grace Hung, Taipei Times
“To cope with the drastic inventory correction cycle faced by the semiconductor industry as well as macroeconomic uncertainties including inflation, interest-rate hikes, wars and geopolitical tensions, the company will cautiously evaluate its capacity expansion,” company president John Wei (尉濟時) told an online investors’ conference yesterday.
However, the chipmaker reiterated that its planned capacity expansion for this year was unchanged at an annual growth rate of 6 percent to 7 percent, after a downward revision in May from an estimate of 8 percent annual growth.
The Singapore fab contributes 15 percent to the company’s total capacity.
“Looking into the third quarter, as sluggish end-market demand led to a slow pace of supply chain inventory digestion, customers are taking a conservative approach to wafer ordering and inventory buildup in the second half of this year,” Wei said.
As a result, Vanguard said it expects wafer shipments this quarter to grow 4 percent to 6 percent quarter-on-quarter, after a significant rebound of about 24 percent last quarter.
Factory utilization is to be flat at 60 percent this quarter, compared with last quarter, Wei said.
Gross margin would slide to between 25 percent and 27 percent during the current quarter, the lowest levels in about eight years, from 30 percent during the three-month period to June. Vanguard attributed the reduction to heavy depreciation costs and higher utilities costs.
Vanguard expects gross margin to rebound to about 30 percent or 40 percent after factory utilization swings back to higher levels, when the semiconductor inventory correction cycle ends and the global economy recovers, company chairman Fang Leuh (方略) said.
The chipmaker said it has short order visibility of about three months.
Vanguard’s power management chip customers are expected to face severe inventory corrections in the third quarter and possibly into the fourth quarter, it said.
Power management chips made up 63 percent of the company’s total revenue last quarter.
Average selling prices are to hold steady this quarter on a sequential basis, as a better product mix helps offset lower prices from wafers Vanguard prebuilt for customers in the first quarter and in the final quarter last year.
Net profit expanded to NT$1.994 billion during the quarter ending on June 30, compared with NT$1.36 billion in the first quarter. That represented a dip of about 59 percent from NT$4.89 billion in the second quarter of last year.
Earnings per share rose to NT$1.21 last quarter, from NT$0.82 in the previous quarter. On an annual basis, earnings per share were down from NT$2.94.
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