Fri, Sep 08, 2006 page12

• Wafer Works to acquire silicon wafer maker

  SILICON SCOOP The government has given the silicon supplier the go-ahead to purchase Jinzhou Youhua New Energy Co, China's second-largest silicon wafer maker

  • By Jessie Ho / STAFF REPORTER
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  Wafer Works Corp (合晶科技), a local silicon supplier, said yesterday that the company has gained government approval to increase its investment in Jinzhou Youhua New Energy Co (錦州佑華新能源), the second-largest silicon wafer maker in China.

  The board of Wafer Works decided in June to acquire an 87.5 percent stake in Jinzhou Youhua at US$6.28 million through its Silicon Technology Investment (Cayman) Corp, in which Wafer Works holds a 64.74 percent stake.

  The proposal was approved by the Investment Commission, Wafer Works said in a filing to the Taiwan Stock Exchange yesterday.

  After the investment, Jinzhou Youhua will become a wholly-owned subsidiary of Wafer Works. The Taiwanese company previously held a 12.5 percent stake in Jinzhou Youhua.

  "I think this is a good investment, given the sizzling solar energy industry," said Angus Liang (梁志豪), an analyst with Capital Securities Corp (群益證券), in a phone interview yesterday.

  A shortage of raw materials is the major hurdle facing the fast-growing solar cell manufacturing sector through 2008. The shortage has seen the price of silicon materials peak at US$300 per tonne, Liang said.

  In their efforts to expand capacity, many silicon wafer makers have sought to acquire rival companies. This is obviously a better strategy than building new plants from scratch, given the lower costs involved and the ability it gives the company to immediately meet demand, Liang said.

  Silicon wafers for semiconductor chips account for most of Hsinchu-based Wafer Works' revenue, although the firm also tapped into the solar silicon market in the second quarter of last year through its Shanghai unit, Jing Ji Electron Material Co (上海晶技).

  After the acquisition of Jinzhou Youhua, solar wafer manufacturing will contribute 30 percent to 40 percent of Wafer Works' total revenues this year, the company said in June.

  Established last October with capital of 22 million yuan, Jinzhou Youhua, based in China's Liaoning Province, commenced mass production in November and posted after-tax earnings of 8 million yuan (US$1 million) last year.

  With an annual capacity of 20 megawatts, Jinzhou Youhua manufactures monocrystalline silicon wafers, which yield higher conversion efficiency than polycrystalline ones.

  For the first half of the year, Wafer Works reported pre-tax income of NT$291.39 million (US$8.87 million), or NT$1.63 per share, on sales of NT$1.61 billion. Among the earnings, 30 million yuan was generated from the investment in Jinzhou Youhua.

  Gross margin for solar silicon wafer manufacturing was over 20 percent in the period, and the figure will climb further as the price of silicon wafers will continue to rise in the third quarter, Wafer Works chairman Pat Chiao (焦平海) said in July.

  Wafer Works reported sales grew 92.25 percent to NT$1.95 billion for the first seven months of the year.

  Shares of Wafer Works closed down by the daily limit of 7 percent to NT$56.3, after SolarBuzz, a US firm that tracks the industry, said prices for solar panels in the US and Europe would remain flat this month compared with last month.
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