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MediaTek shares extend losses on woes from ASE wastewater scandal

TAIPEI -- Shares of MediaTek Inc. (聯發科), one of Taiwan's leading integrated circuit designers, extended its losses Friday morning from the previous session amid worry that the company's shipments will be affected by a closure of an Advanced Semiconductor Engineering Inc. (ASE,日月光) plant in Kaohsiung, dealers said.

ASE, an IC packaging and testing service provider, is part of MediaTek's supply chain, which means that the current pollution woes at ASE's K7 plant could affect MediaTek's high-tech packaging and testing services, dealers said.

MediaTek Inc. (聯發科), one of the sector's heavyweights, falling 0.95 percent to end at NT$417.00. The weighted index closed up 15.61 points, or 0.18 percent, at 8,376.94.

“Although MediaTek said yesterday that ASE is only one of its suppliers and the IC designer has left its fourth quarter sales guidance unchanged, the stock was still under downward pressure this morning,” Ta Ching Securities analyst Andy Hsu said.

Hsu said there are concerns about ASE's K7 plant since Kaohsiung's Environmental Protection Bureau said the company should prepare to shut down the plant as it had provided the bureau with falsified information about its wastewater treatment.

On Monday, the bureau found that ASE had been dumping wastewater containing heavy metals into Houjing Creek, a major irrigation source for farmlands.

ASE was fined NT$600,000 and given 10 days to explain and defend its actions or face a shutdown of the K7 plant.

“As the K7 plant features high-end packaging and testing services, many investors are worried that IC designers will feel the pinch if it is shut down,” Hsu said.

The K7 plant accounts for one-third of the sales generated by ASE's Kaohsiung complex, which makes up 28 percent of the company's total revenue. ASE, the world's largest IC packaging and testing services provider, holds about a 30-percent share of the global market.

“But I am not too worried because there are adequate high-tech IC packaging and testing services worldwide,” Hsu said. “IC designers like MediaTek could shift their orders to ASE's competitors if the K7 plant closes.”

The analyst said smaller domestic companies like Siliconware Precision Industries Co. (矽品) could profit from ASE's woes.

“Judging from MediaTek's sales for the October-November period, I believe that the IC designer will be able to achieve its fourth quarter sales goal. The company could even surpass its sales target on the back of solid demand for smartphone chips from Chinese buyers,” Hsu said.

During the October-November period, MediaTek's consolidated sales totaled NT$26.71 billion. The company's sales guidance for the fourth quarter is between NT$37 billion and NT$39 billion.

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