The board of Sino American Silicon (“SAS” or the “Company”) today held a meeting. Besides the approval of the FY2011 first half Financial Statement, the board also assigned directors and supervisors for the new spun-off subsidiaries GlobalWafers and Taiwan Sapphire to match the corporation spin-off schedule. To elevate integration competitiveness and operation synergies, the board also passed the resolution to acquire the semiconductor silicon wafer related business in subsidiary COVALENT SILICON CORPORATION and COVALENT MATERIALS SEKIKAWA CORPORATION etc affiliated with COVALENT MATERIALS CORPORATION, the Japanese silicon wafer company, for a total consideration of 35 billion Japanese Yen (approximately NTD 13.125 billion , USD 0.45 billion.)
The predecessor of Covalent Materials was Toshiba Ceramics, a listed subsidiary of Japan’s Toshiba Company. In 2007, Covalent Materials spun-off and became an independent company, producing high quality silicon wafers with diameters 6 inches to 12 inches. The acquisition can greatly improve the operations of SAS’ semiconductor business; in particular, the acquisition can greatly enhance the scale and technology for its 8 inch semiconductor wafer product line to make the current product portfolio more complete, providing a full range of semiconductor wafer products for its customers and increase the value-add of the business through an integrated production process. SAS expects its production of semiconductor wafers will grow nearly three times through this acquisition, making SAS the 6th largest semiconductor wafer manufacturer in the world.
Currently the semiconductor business of SAS accounts for 30% of the firm’s total revenue. After completion of the acquisition, SAS will integrate the wafer business of Covalent into its semiconductor wafer business unit to realize the operation synergies. SAS’ President Doris Hsu indicates that the success of SAS’ acquisition of American Globitech in 2008 resulting in over two times growth and over double profit increase in the semiconductor wafer business has given SAS much confidence in this acquisition. Besides the tier-1 clients in the Europe and America, SAS will penetrate into the Japanese market which has the highest quality and precision standard in order to set up a complete global production and marketing strategic arrangement. SAS indicates it shall hold an Extraordinary General Shareholders’ Meeting to obtain shareholders’ approval of the acquisition. Furthermore, SAS is in discussions with principal bankers to obtain bridge loan from a bank syndicate to finance this acquisition.
The consolidated accumulated revenue as of June 30, 2011 is NTD $11.16 billion; net income after tax is NTD $1.25 billion, an increase of 21.4% over same period in last year; EPS after tax is NTD $3.05.
SAS identifies that uncertain environment in solar market results in dropping demand and price, operation income and profit fall distinctively in Q2. SAS coped with the aforementioned problem by selecting orders to maintain operation structure. However, price rebounds in Q3 and order inquiry from downstream increases. We can perceive that industrial visibility is on the move. From the perspective of supply chain, the biggest cost of solar product comes from purchase of polysilicon which benefits more considering its ratio of price and cost. SAS strives to negotiate cooperation strategy with suppliers to achieve grid parity with more reasonable price, solar market demand shall soar and improves industrial development by then.
As for sapphire substrates, SAS specifies that slack demand in terminal market impacts product price and operation income, yet land purchasement for plant expansion shall still proceed. For semiconductor, order and shipment are fully loaded. However, SAS shall carefully monitor market changes with immediate response to see if the downstream request will be influenced by the severe changes in international economy recently.