Yageo lands obtains large capacitor, resistor orders from Motorola

Taipei, May 10, 2004 (CENS)--Yageo Corporation, Taiwan's leading manufacturer of passive electronic components, has acquired big-ticket orders for high-tier chip resistors and multi-layer ceramic capacitors (MLCCs) from the mobile phone unit of Motorola Corp. The orders will be filled in the fourth quarter of this year.

An institutional investor noted the acquisition of the Motorola orders shows Yageo is in a position to challenge Japanese rivals because it is capable of rolling out good-quality high-tier passive electronic components. At present, Yageo sees high-tier and special-specification passive electronic components account for 30% of its total output. The company aims to strive for orders from Japanese companies while raising product profit margin.

Compared with domestic rival manufacturers, Yageo can stand firmer because it has secured big-ticket orders from world-class electronic manufacturing service (EMS) companies.

Since the beginning of this year, Yageo has seen booming sales, despite the traditionally sluggish second quarter. In the past, the company usually suffered a 10% sales decline in the second quarter of a year, from the previous quarter's level. But this year, the company maintained a flat business in the second quarter, indicating it will see rosy picture in the third quarter.

The company predicted the prices of MLCCs to remain stable in the second quarter, despite a 4% slide in the first quarter. Chip resistor price is expected to drop by less than 2% in the second quarter. In the past, the average price of passive electronic components usually experienced a 3% decline quarter-on-quarter. The price projection shows the company will perform better in the second quarter than ever before.

Yageo posted after-tax earnings of NT$415 million (US$12.46 million at US$1:NT$33.3), or NT$0.18 (US$0.005) in earnings per share, in the first quarter, the highest level since the third quarter of 2001. The company's first-quarter after-tax earnings grew sevenfold from the previous quarter's NT$52 million (US$1.56 million). The company suffered net loss of NT$673 million (US$20.21 million) in the first quarter of last year.

According to an evaluation made by Credit Suisse First Boston, Yageo is proved able to compete with Japanese rivals because of its acquisition of certificates and orders from Motorola. This also indicates that global output of high-tier passive electronic devices is very tight.

Yageo had sales margin of 29.7% in the first quarter of this year, marginally up from the previous quarter's 29.6%. The company expected its sales margin to range from 29.5% to 31% in the second quarter. Since the second half of last year, the company has seen production capacity utilization rate linger at between 90% and 92% and the rate will remain at a high level of 90% in the third quarter.

The company boasted it would see monthly output increase to 11 billion MLCCs and 22 billion chip resistors at the end of the second quarter from the previous quarter's 10 billion and 20 billion, respectively.