Tags: Advanced | Semiconductor | China | ASX

Advanced Semiconductor: China Strategy

By    |   Friday, 07 Oct 2011 02:13 PM

The economy has slowed, but it hasn’t yet put a halt to demand for smartphones that have become part of everyday life for hundreds of millions around the world. Strong demand has prompted Advanced Semiconductors Engineering (ASX) to put cash into China as a strategy to take advantage of it.

The world’s largest maker of integrated circuits is investing $6 billion in a new site in Shanghai’s Pudong district over the next decade, a move it expects will create 50,000 jobs and $8.5 billion in annual revenue. It already has invested $2 billion on the new site.

With much of its low-cost manufacturing already moved to mainland China in order to save on production costs, the Taiwanese company recently made its first issuance of bonds in yuan. Sold on the Hong Kong Stock Exchange, the Chinese currency bonds were valued at $23 million in three-year bonds at 3.125 percent and $76 million in five-year bonds at 4.25 percent.

At the same time, the company is working to ensure shareholder value through a $770 million share buyback program that will last through Nov. 1.

Long view

Just as ASX is looking 10 years down the line at its new development in Shanghai and the revenues that investment will bring, it also is looking long term at growth forecasts. For the period 2011 to 2014, management recently raised its expectations to between 7 percent and 9 percent, from a previous estimate of 5 percent.

Though the fourth quarter of this year is a bit more difficult for the company to read, it is still expecting annual growth of 10 percent. Its second quarter report showed higher gross margin by nearly half a percent over the previous quarter. Net income for the quarter higher is seen above the previous quarter at nearly $120 million but lower than the year-on-year.

HSBC recently upgraded ASX stock to overweight from neutral. The company next reports on Oct. 28.

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The economy has slowed, but it hasn t yet put a halt to demand for smartphones that have become part of everyday life for hundreds of millions around the world. Strong demand has prompted Advanced Semiconductors Engineering (ASX) to put cash into China as a strategy to take...
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2011-13-07
Friday, 07 Oct 2011 02:13 PM
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