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Japan-Update

Sumco sees profit soaring as silicon wafer prices rebound

Producers move cautiously to raise capacity despite growing demand

TOKYO -- Sumco's group net profit will almost quadruple to 24.6 billion yen ($216 million) for the year ending in December, the Japanese silicon wafer giant said Thursday, crediting a rebound in product prices.

The projected net profit would be the highest since the fiscal year that ended in January 2008. The company also forecasts operating profit to nearly triple, reaching 40.7 billion yen on a 22% sales increase to 258.4 billion yen.

The earnings surge is fueled by the recovery in silicon wafer prices, following their slump amid the 2008 global financial crisis. Of the 26.7 billion projected rise in operating profit, Sumco attributes over 20 billion yen to the higher prices.

The company's core 300mm-diameter wafers are attracting strong demand tied to memory chips, keeping Sumco's plants running at full capacity. Global demand for that category stands at 5.6 million units a month, and the company predicts the figure will continue to rise 5-6% annually because semiconductor manufacturers are expanding memory production facilities. Sumco projects a roughly 1 million unit increase in monthly demand by 2020.

Wafer makers are raising prices as a result, with a hike of over 20% on the year expected for the 300mm versions for the current quarter ending in December. Those companies also are striking long-term contracts with chipmakers.

"We will realize a 20% price increase in 2018, and there will be further price increases in 2019," said Mayuki Hashimoto, chairman and CEO of Sumco.

Though wafer manufacturers are regaining the capacity to invest due to the price hikes, they remain wary that expanding production capacity could upend the supply balance. Increased output following the financial crisis depressed wafer prices for a long time.

Sumco intends to lift monthly capacity by 110,000 units in 2019, and Germany's Siltronic plans an increase of 70,000 units the same year. Japan's Shin-Etsu Chemical looks to expand production gradually.

However, such increases would not absorb the extra global demand. Many analysts think Sumco and other major peers will continue to see profit growth for the near future as long as semiconductor demand remains stable.

Sumco's sales for the three quarters through September rose 23% on the year to 190.4 billion yen, generating a net profit of 16.6 billion yen -- up nearly five times from a year earlier. The company also revealed Thursday a year-end dividend of 16 yen per share, bringing the full-year dividend to 26 yen, up 16 yen from 2016.

(Nikkei)

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