ASE forecasts IC inventory adjustments, maintains capex budget

June 30, 2011 — Semiconductor assembly and test services (SATS) provider Advanced Semiconductor Engineering Inc. (ASE, TAIEX:2311) predicts that the global IC sector will face inventory adjustments in the near term. ASE will maintain its capital expenditure plan through the correction period.

Tien Wu, chief operating officer of ASE and upcoming keynoter for SEMICON West, said high semiconductor inventories will force a natural correction. The current inventory level is higher than the sector’s normal level of about 70 days.

Statistics, released in May, show that the semiconductor sector recorded 73 days of inventory for Q1 2011, up from 66 days registered for Q4 2010, Wu said, speaking at ASE’s annual general meeting. Q2 2011 inventory should also be high.

Despite higher-than-normal IC inventories, ASE will maintain its NT$23.2 billion (US$800 million) capital expenditure plan for future expansion by the end of 2011. ASE shareholders approved a proposal to allow the company to make a rights issue or issue American depository receipts.

Wu expects inventory adjustments to affect the IC industry through August at the earliest. Wu predicts ASE sales growth of about 10 percentage points higher than the industry’s average in 2011.

In 2010, ASE posted NT$188.7 billion in consolidated sales, up 120% from 2009, while its net profit rose 172% to NT$18.34 billion. The packaging company broke ground on a 6000 employee facility in 2010, expected to go on-line in November 2011. Read about ASE’s expansion here.

Asia Pulse Pty Limited points out that rival SATS provider Siliconware Precision Industries (SPIL, TAIEX:2325) also predicted semiconductor sector adjustments in Q3, citing Japan’s March 11 earthquake and tsunami-related disruption. However, SPIL chairman Bough Lin said that the global IC industry should have a better H2 2011 after inventory adjustments.

Morris Chang, chairman of foundry Taiwan Semiconductor Manufacturing Co. (TSMC, TAIEX:2330) cut his 2011 forecast for output growth of the global IC sector, excluding the memory chip segment, from 7% to 4%, Asia Pulse reports.

(CNA)

Copyright 2011 Asia Pulse Pty Limited

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