Vanguard International Semiconductor Corp (世界先進) yesterday said revenue this quarter would drop by about 15 percent from last quarter, as customers digest inventory amid sluggish demand for consumer electronics during the slow season.
Vanguard, which makes driver ICs used in displays and power management chips, joined its global peers in giving a bleak outlook for the current quarter.
Revenue is expected to fall for a third consecutive quarter to between NT$7.9 billion and NT$8.3 billion (US$259.7 million and US$272.9 million) this quarter, compared with NT$9.57 billion the previous quarter, Vanguard said.
Photo: Ann Wang, Reuters
Its factory utilization rate is expected to fall by 10 percentage points this quarter, as customers continue to scale down orders, the chipmaker said.
The expected decline does not fully reflect the extent of an industry slump, as Vanguard has allocated a small part of its manufacturing capacity to help customers “pre-build” chip inventory for shipments at a later date.
Gross margin is expected to slide to 29 to 31 percent this quarter, from 39.2 percent last quarter, approaching the lowest level since the first quarter of 2020, the company said.
Falling average selling prices are also weighing on gross margin this quarter, the chipmaker said.
“We are working with customers to deal with the severe inventory correction cycle, as end-product market demand is depressed by the macroeconomic situation,” Vanguard chairman Fang Leuh (方略) told an online investors’ conference.
“The first quarter should be the coolest season as indicated by macroeconomy and customers’ expectations. That will be followed by a gradual recovery, but we are not clear how fast the recovery will be,” he said.
Vanguard said that it has seen inventory pressure mainly from driver ICs used in notebook computer displays, power management chips and industrial segments, such as data centers.
Driver ICs used in TV displays are expected to hit the bottom this quarter, it said.
Power management chips contributed 78 percent to Vanguard’s revenue last quarter.
In response to the slowdown, Vanguard halved its capital expenditure this year to about NT$10 billion, from NT$19.4 billion last year, by postponing the delivery of some new manufacturing equipment.
More than half of the capital expenditure would be allocated to building a new fab, Fab 5, and boosting wafer capacity there, the chipmaker said.
Vanguard would carry out its capacity expansion plans despite the industrial downturn, as it is obligated to supply wafers to customers based on long-term agreements signed before market sentiment soured.
The investment would help boost its manufacturing capacity by 8 percent this year from last year, the chipmaker said.
Vanguard said it is evaluating the possibility of investing in a new 12-inch factory to satisfy customers’ long-term demand for wafers.
Cost inefficiency makes it infeasible to invest in another 8-inch fab, it said.
Vanguard operates five 8-inch fabs.
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