Vanguard Int'l to withdraw from DRAM market in mid-2004

Dec 01, 2003 Ι Industry In-Focus Ι Electronics and Computers Ι By Ken, CENS
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Taipei, Dec. 1, 2003 (CENS)--Taiwanese chipmaker Vanguard International Semiconductor Corp. (VISC) recently decided to completely stop production of DRAM (dynamic random access memory) in mid-2004 and focus on chip foundry service.

Company president S.R. Chien pointed out that the specialization shift is in line with the rebounding foundry market, in which the supply is strained as a whole. The booming foundry market has sent his company's gross margin on the business up to 29%, on par with that registered by the second-largest pure foundry player United Microelectronics Corp. (UMC).

Currently, foundry service and DRAM production account for two-thirds and one- third of VISC's total capacity, respectively. The company is now running at 91% capacity at its eight-inch wafer factory, whose maximum monthly output capacity is 45,000 wafers of chips.

Chips for networking equipment, handsets, digital cameras and liquid-crystal displays (LCDs) are now the major products on its foundry lines. Some 65% of them are contracted by suppliers in Asia including Japan.

Chien estimated excessive demand for foundry service to push up his company's earnings and revenue by 10%, respectively, next year. To keep up with the booming growth, his company has planned to spend NT$2 billion to NT$3 billion (US$58 million to US$88 million at US$1:NT$34) on expansion next year, with output capacity initially boosted to 48,000 wafers to 50,000 wafers a month and finally to 60,000 wafers.

The VISC top executive said his company has no plan to equip itself with 12-inch wafer factory for the moment.

VISC preliminarily estimated its fourth-quarter revenue to rise 17% from the third quarter and 67% from the comparable period of last year, and projected quarterly gross earnings margin to post at 10% throughout this quarter, from a 2.9% loss it reported in the third quarter. Up to date, VISC is still saddled with total operating losses of NT$10 billion (US$294 million).

However, non-operating income is estimated at NT$400 million (US$11.7 million) throughout this year and a majority of it was realized in the third quarter.

Chien pointed out that his company has begun to record desired efficiency with its corporate transformation strategy, judging from the fact that his company has maintained profitability every month since May this year and that its foundry service has risen to account for 60% of its total output capacity from the first quarter's 50%.

In June this year, VISC's biggest corporate shareholder, Taiwan Semiconductor Manufacturing Co. (TSMC), cut its ties with VISC, with TSMC chairman Morris Chang quitting VISC chairmanship. Since then, VISC has marched toward chip foundry business.
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