Although King Yuan Electronics Company (KYEC) may trim its capital expenditure (capex) in 2007, its expansion of DDR2 production will not be affected by uncertainties in the semiconductor industry, according to the company.

KYEC said demand visibility will remain unclear in the first quarter of 2007. After seeing its fourth quarter sales grow by only a slight 3.5% on quarter, KYEC does not see customers ramping up orders before Chinese New Year in mid-February with some fellow competitors even cutting quotes to attract orders.

A Fubon Securities report commented that a decline in KYEC’s first quarter sales will be modest amid better-than-expected outsourcing orders landed from Freescale Semiconductor, NXP Semiconductors and Nvidia. The investment bank estimates that the percentage contribution from these customers to KYEC’s revenues will rise to the mid- to high-single digits this year, versus low-single digits in 2006.

Amid the uncertain demand trend, KEYC said its 2007 capex might be lower than last year’s NT$8 billion (US$244 million). Additional equipment procurement depends on demand in the second half of the year, the company said. Out of the NT$8 billion for 2006, the company spent NT$6.5 billion on equipment procurement.

Chin-Kung Lee, chairman of KYEC, was cited by a Chinese-language Commercial Times report as saying that the company will be well prepared for its deployment in the DDR2 sector by consolidating with its subsidiaries. The paper cited Lee as saying that these subsidiaries will focus on DDR2 packaging and KYEC will maintain its focus on testing.

By: DocMemory
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