PETALING JAYA: Semiconductor firm Unisem (M) Bhd is expected to register better earnings performance in the quarters ahead, backed by better utilisation rates and economies of scale.
Despite overall weakness in the semiconductor space, RHB Research said the company’s management remains cautiously optimistic on better quarters ahead, backed by solid loading forecasts from the majority of its customers.
“However, we believe the loadings will not recover to financial year 2022 (FY22) levels anytime soon and hence, margins may remain under pressure, given the heightened electricity and staff costs.”
Citing Unisem’s management, RHB Research noted that a major customer of the company is involved in the application of electric vehicles and is in the midst of relocating its supply chain to Malaysia.
The research house said this should significantly boost Unisem’s utilisation in the third and fourth quarters.
“The Chengdu plant’s utilisation was at circa 70% as compared to the Ipoh plant’s 50% to 55% in the first quarter, the assembly and test operations were significantly affected by soft demand.
“The Chengdu expansion should start to contribute to the bottomline in FY23 and the Gopeng facility should contribute from in the first quarter of 2024.
“Total capital expenditure incurred in the first quarter of 2023 was RM87.9mil for the construction of its Gopeng Plant and Phase 3 building in Chengdu.”
Citing Unisem’s management, Kenanga Research said the company guided for an uptick in revenue of 10% to 12% quarter-on-quarter, going into the second quarter of FY23.
The research house said the potentially better earnings will be backed by improving order forecast from customers and “a shimmer of light” in terms of die support for its wafer bumping facility in Ipoh, which was weighing on the group.
“However, we remain cautious on the group’s path to recovery as there will be new capacity coming online in the second half of FY23, which may further increase its operating cost.
“In Chengdu, its Phase 3 plant (which doubles the capacity of Phases 1 and 2 combined) has been completed and is in the midst of qualifying customers in phases.”
Additionally, Kenanga Research said Unisem’s new plant in Gopeng is expected to be completed by November 2023, with the onboarding of customers to only take place in the first quarter of FY24.
Hong Leong Investment Bank (HLIB) Research meanwhile said utilisation rates in Unisem’s Chengdu plant were affected by lesser working days due to the Chinese New Year holidays.
“Construction of Phase 3 has been completed and is undergoing qualification of the facilities and cleanroom.
“Assembly and test operations in the Ipoh plant were affected by softer demand for consumer electronics.”
HLIB Research added that construction of the Gopeng plant is progressing as planned.
“As Unisem is embarking on aggressive expansions in both China and Ipoh to capture the opportunities presented by the United States-China trade war, we are cautious on the global semiconductor outlook, which is currently plagued by inventory adjustment and slower demand.”