Apr 4, 2023

Tang Shihua audio is not supported! China’s Vanchip Falls After Saying It Will End Wafer Supply Deal With UMC Amid Sluggish Demand (Yicai Global) April 4 -- Shares of Vanchip fell after the Chinese smartphone chip supplier said it will terminate its wafer supply deal with world-leading chipmaker United Microelectronics signed during the pandemic because of changes in supply and demand. Vanchip [SHA: 688153] ended the morning trading session down 2.4 percent at CNY59.84 (USD8.70). Since the second half of last year, the decline in demand for terminal consumer electronics made the wafer purchase price previously agreed with UMC unprofitable, the Tianjin-based company announced yesterday. Vanchip will pay USD4 million termination fees to UMC, it added. The pair signed a supply guarantee agreement for integrated circuit wafers in 2021 because of the general shortage of production capacity of major fabs at the time. The deal set the price and monthly order volume of eight-inch wafers purchased by Vanchip from UMC between last year and 2024. The resolution of the deal will give Vanchip greater control over wafer costs and more flexibility in selecting suppliers to address price pressures faced by consumer electronics customers, it added, noting that the termination fee will result in net profit decline of USD1.3 million decline last year and USD2.7 million this year. Vanchip’s operating income fell 35 percent to CNY2.3 billion (USD334 million) last year from 2021 because of sluggish demand in the terminal consumer electronics market, the firm said in its preliminary 2022 earnings report released in February. Net profit excluding non-recurring losses rose 51 percent to CNY22.2 million (USD3.2 million) thanks to the optimization of the product structure that resulted in an increase in gross margin. Editor: Futura Costaglione