Yageo is Restocking in Preparation for Demand after the COVID-19 Pandemic Ends

Yageo Corp (國巨), the world’s third-largest maker of multilayer ceramic capacitors, yesterday said that although order visibility for next quarter is vague, it is stepping up restocking in preparation for demand after the COVID-19 pandemic ends. Company chairman Pierre Chen said visibility is not clear for the third quarter, although he was confident of profit contribution from Kemet Corp.

The company has forecast double-digit percentage quarterly revenue growth this quarter on recovering customer demand, but is uncertain whether the momentum would extend into the second half of the year.

“Because of the pandemic, we do not have clear visibility for the third quarter,” Yageo chairman Pierre Chen (陳泰銘) told reporters on the sideline of the company’s annual shareholders’ meeting in New Taipei City’s Shenkeng District (深坑).

“I believe Yageo’s revenue and profit will continue to grow after combining [revenue] from Kemet Corp starting from July,” Chen said.

Kemet, based in Fort Lauderdale, Florida, manufactures passive components.

The company’s revenue is 20 percent less than Yageo’s, but it has a better profit margin, given its rich product portfolio in the automotive and national defense sectors, as well as industrial and medical devices, Yageo said.

As they are niche products, the acquisition of Kemet would help Yageo ride volatility in the consumer electronics industry, Chen said.

Yageo would continue scouting for merger and acquisition opportunities to expand its global sales channels and to enhance its technological capabilities, Chen said.

More than 60 percent of Yageo’s revenue came from consumer electronics, smartphones in particular, he said.

Yageo’s priority is to restock, he said.

“We cannot install capacity until [demand outlook] becomes clear. We have to plan ahead,” Chen said. “We are hoping to increase inventory to healthy levels, which is about 100 to 110 days. We are still far from that.”

The company aims to increase inventory to between 50 and 60 days by the end of this quarter by doubling its capacity utilization to about 60 percent, compared with a trough of 30 percent in February, Yageo said.

Yageo would not relocate production capacity out of China, despite trade difficulties and a technology race between Washington and Beijing, it said.

China remains its manufacturing hub, providing 70 percent of manufacturing capacity, it said.

However, Yageo is building new research and development, and high-end product capacity in Taiwan, it said.

“Taiwan will be Yageo’s manufacturing and R&D center for high-end products,” Chen said.

Yageo plans to invest NT$31.2 billion (US$1.05 billion) to expand production capacity at its plants in Kaohsiung’s Dashe (大社) and Nanzih (楠梓) districts, it said.

Moreover, it is setting up a research and development center, and has started construction of a new plant at the Dafa Industrial Park (大發工業區) in Kaohsiung’s Daliao District (大發), which would create about 1,900 jobs, the company said.

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