Walsin rallies on soaring passive components demand

Source: Taipei Times news

Passive components supplier Walsin Technology Corp (華新科技) yesterday saw its shares rally 8.28 percent on expectations that expanding applications from smartphones to cars would extend a supply crunch.

Shares of Walsin have more than tripled since the beginning of this year, closing at NT$340 in Taipei trading, as the company benefits from rising prices and better profitability.

“We are seeing explosive growth in passive component demand, which should fuel Walsin’s revenue growth this year and next year, as already reflected in the past few quarters,” Walsin president Ku Li-chin (顧立荊) told investors on Thursday.

The company has clear order visibility through the end of this year, Ku said.

Walsin is expanding capacity to resolve a supply-demand imbalance, but it still cannot fully satisfy customers’ demand due to longer equipment lead time, he said.

“Some might ask when the supply constraint would end? I do not have the answer,” Ku said. “I have yet to set the light at the end of the tunnel.”

Ku said the company’s capacity would increase 10 to 20 percent by the second half of this year and revenue growth would be bolstered by price increases.

Prices have been trending upward, because passive components have been undervalued in the past 20 years and no significant capacity expansion has been made, he said.

As passive component costs account for less than 1 percent of an iPhone’s retail price, Ku said Walsin is looking for more reasonable pricing to enable it to recover manufacturing equipment investments within two to three years.

Walsin’s gross margin jumped to 35.8 percent last quarter from 22.8 percent a year earlier, while revenue swelled 42.8 percent to NT$6.64 billion (US$22.17 million) from NT$4.65 billion.

Net profit soared 230 percent annually to an all-time high of NT$1.31 billion, or earnings per share of NT$2.71, company data showed.

Demand for chip resistors as well as multilayer-ceramic capacitors (MLCC) has surged due to widening applications, such as facial recognition for smartphones, advanced autopilot systems for cars and electric vehicles.

An iPhone X is equipped with 1,100 MLCCs, compared with 300 to 500 units in the first-generation iPhone, Ku said.

Vehicles, especially electric cars, are another big consumer of MLCCs, and should drive growth by 10 times over the next decade or so, he said.

An electric car is equipped with at least 10,000 passive components, compared with 1,000 for gas-fueled cars, the company said.

The arrival of 5G wireless connectivity in the second half of next year or early 2020 should trigger a new wave of smartphone replacement and passive component demand, Ku said.

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