INTERVIEW - Singapore UMS cashes in on rising chip demand

SINGAPORE Tue Aug 3, 2010 3:34pm IST

Related Topics

Stocks

   
Priyanka Gandhi Vadra, daughter of Congress party chief Sonia Gandhi, adjusts her flower garlands as she campaigns for her mother during an election meeting at Rae Bareli in Uttar Pradesh April 22, 2014. REUTERS/Pawan Kumar

Election 2014

More than 814 million people — a number larger than the population of Europe — are eligible to vote in the world’s biggest democratic exercise.  Full Coverage 

SINGAPORE (Reuters) - Singapore chip equipment maker UMS Holdings(UMSH.SI), which counts Applied Materials as its biggest client, will boost capacity utilisation to 85 percent in the third quarter from 65 percent in a booming industry.

"We have a lot of orders from customers in the semiconductor business...We have more orders than our capacity can take," UMS Chief Executive Officer Andy Luong told Reuters in an interview.

Applied Materials(AMAT.O), the world's largest semiconductor equipment maker, accounts for more than 50 percent of UMS sales.

Luong said UMS was poised to take advantage of the upswing in demand for semiconductor chips as global spending on electronics such as smartphones and computers increases.

Apple's(AAPL.O) newest products, the iPhone 4 and the iPad, have led more consumers to upgrade to higher-end gadgets that require more advanced chips, benefiting firms in the semiconductor supply chain, such as UMS.

"Outlook for the semiconductor industry is very bullish and healthy," said Luong. Nearly 75 percent of its revenue comes from the semiconductor business.

By 0840 GMT, UMS shares were down 4.6 percent at S$0.42 after hitting a 2010 high of S$0.44 on Monday. The stock has risen 147 percent so far this year, outperforming peers such as Global Testing and AEM Holdings.

"UMS is undervalued, compared to other technology firms in Singapore, and its valuation looks very attractive right now," said Roger Tan, head of research at SIAS Research.

Tan said the firm was trading at about 6 times its earnings versus an average of 12-15 times for other Singapore-listed technology companies.

Luong expects UMS to have a full order book for the rest of the year but declined to provide revenue forecasts.

The company's second-quarter net profit surged 62 percent to S$7.5 million from the preceding quarter while revenue rose 43 percent to S$35.3 million.

Increased capital spending in the sector has raised concerns of a supply glut forming in late 2010 or early 2011 if Europe's debt problems persist and weakens demand for electronics.

In July, TSMC, the world's largest contract chipmaker, raised its 2010 capital spending forecast by 23 percent to $5.9 billion, after posting a record quarterly profit.

But Luong sees little chance of an oversupply as the increased spending targets are mainly because chipmakers under-invested during the global financial crisis.

"Moreover, the increase in capacity expenditure by the big chipmakers is to meet demand for new technologies," he said.

Luong said UMS aims to expand its oil and gas business as a hedge against the cyclical semiconductor industry. He expects revenue contribution from the energy sector, which accounts for less than 25 percent of UMS total sales, to increase.

(Editing by Raju Gopalakrishnan and Anshuman Daga)

(For more news on Reuters India, click in.reuters.com)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Internet Constitution

REUTERS SHOWCASE

Chip Company

Chip Company

Panasonic, Fujitsu to form chip design, development company  Full Article 

Huawei Shrugs

Huawei Shrugs

China's Huawei says reports of NSA spying won't impact growth  Full Article 

Google Mobile

Google Mobile

Google extends reach into mobile apps with new ad feature  Full Article 

Internet Conference

Internet Conference

Brazil conference will plot Internet's future post NSA spying   Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage