Vanguard International Semicon-ductor Corp  yesterday said it planned to purchase a chip plant producing older-style 8-inch wafers from Winbond Electronics Corp  for NT$8.3 billion (US$251.1 million) to expand capacity amid growing demand.

Along with the acquisition, Hsinchu-based Vanguard would also secure a contract from Winbond to supply 700,000 wafers to cut memory chips between next year and 2011.

"We need to boost capacity in the search for further growth," Vanguard chairman Lin Chuan told a press briefing yesterday after the closure of local stock markets. "This is our first step ?. we will consider buying more 8-inch factories in the future."

Vanguard expected its revenue stream to benefit from the new factory starting in 2009, the second year after the transaction is completed, Lin said, following a signing ceremony.

The new plant would add at least 40,000 wafers a month to Vanguard's output after the transaction is completed next January, the company said.

That would represent an approximately 62 percent increase in output, when compared with Vanguard's current monthly production of 65,000 wafers.

No fund raising activities would be required for the acquisition as Vanguard is cash-rich, with the equivalent of NT$12.19 billion on the books as of the last quarter, the company said.

Winbond said that the deal represented a quick fix for the company in dealing with the 8-inch plant as it was becoming uncompetitive in terms of cost, said Arthur Chiao, chairman of the memory chipmaker which is also based in Hsinchu.

As opposed to most of the nation's other memory chipmakers, Vanguard makes 60 percent of its revenues from driver integrated circuits used in liquid-crystal-display panels for monitors, televisions and consumer electronics products. Most of these chips are made using mature technologies.

"We think the deal will have a positive impact on both companies, especially Vanguard, as the company will be able to land extra orders that were not previously expected," said Darryl Cheng, a semiconductor analyst with Yuanta Core Pacific Securities.

Without factoring in the supply contract, Vanguard were predicted to increase earnings per share by NT$0.5 next year, Cheng said.

Vanguard are predicted to earn NT$2.5 a share next year, up 36.6 percent from the NT$1.83 a share earned last year, he added.

Shares of Vanguard jumped 3.07 percent to NT$28.55 on the GRETAI Securities Market, while the price of Winbond shares rose 0.85 percent to NT$11.85 on the main Taiwan Stock Exchange yesterday.
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By: DocMemory
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