TAIPEI, Taiwan -- Yageo Corp., one of the world's biggest suppliers of passive components, plans to invest $12 million in China to tap the mainland's growing demand.
Taipei-based Yageo would spend the money to build its first multi-layer ceramic capacitor (MLCC) manufacturing facility in Suzhou next year. The move is necessary for the company to bring down its costs as well as have better access to its OEM, EMS and motherboard customers, given the current downturn in the U.S. and Europe.
"There's a slowdown everywhere except in China," said a Yageo official, who asked not to be named. "Many of our customers have moved or are moving to China. We have to increase our presence there, too."
Some analysts agreed with Yageo's plan. "China has the fastest growth rates in so many IT products," said James Wang, a senior analyst at Merrill Lynch in Taipei. "You go there because the end market is huge and labor costs are low."
Motorola Inc. and Siemens AG together have asked Yageo to ship 40% more chip resistors in the September quarter compared with the prior three months, said the company official. The increase comes as China's authorities demand handset makers purchase a certain number of components on the mainland in order to sell their handsets in the Chinese market.
Yageo now runs a chip resistor plant in Suzhou, which has a 6 billion piece monthly capacity. To better serve customers such as Solectron Inc. and Flextronics International Inc., Yageo wants to gradually shift its resistor production to the facility from Taiwan, he said.
The Suzhou plant now ships half of its output to the two EMS companies, 28% to customers in China and the rest to those in Taiwan. Yageo also has a backend facility in the coastal city of Dongguan, China.
In Kaohsiung, Taiwan, Yageo owns a resistor plant that it acquired from Philips last year. The factory has a capacity of 17 billion pieces per month.
Commercial production of the planned MLCC facility is scheduled in 2003, with no other details available now.
Weak demand worldwide has sent the average prices of passive components down by 15% - 20% since the beginning of the year, some analysts said, adding another 6% - 10% drop is expected through the end of this year.
In the year's first half, Yageo reported a 22% gain in consolidated sales from its local and overseas operations to $390 million. That represented 43% of its 2001 sales forecast.
Yageo competes with ROHM, Tokyo, Japan and Vishay Intertechnology Inc., Malvern, Pa., among many others.