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Siliconware's decision to increase capital reflects optimism: analyst

TAIPEI -- Siliconware(矽品) Precision Industries Co.'s decision to increase its 2014 capital expenditure reflects its optimism that demand for IC packaging and testing services will remain strong amid growth for mobile devices, an analyst said Friday.

“Siliconware is looking into business opportunities arising from the development of the Internet of Things, which is expected to give a boost to the global semiconductor industry,” Asia Securities Investment Consultant analyst Chang Chih-cheng said.

Siliconware's board on Thursday approved a proposal to raise the company's capex for 2014 to NT$18 billion (US$600 million) from the previously planned NT$14.7 billion. The revised 2014 capex target was higher than the NT$14.98 billion spent in 2013.

The company said the increased budget will be used to buy production equipment for advanced packaging and testing technology, in particular to cater to high-end communications chip makers.

A day after the announcement of the revised capex budget, shares of Siliconware rose 0.99 percent to close at NT$50.80 on Friday, outperforming the broader market. The benchmark index in Taiwan ended down 0.06 percent at 9,134.46.

It was the second time this year that Siliconware had increased its capex plan.

The world's third largest IC packaging and testing service provider first raised its 2014 capex budget in March from NT$9.6 billion to NT$14.7 billion to increase investment in several areas, such as flip chip packaging and testing and bumping services.

“The need to increase its capex budget to boost its production capacity became more obvious after the company posted a record high in consolidated sales for May,” Chang said.

“It also expected sales momentum will continue into June and beyond on rising demand from the mobile communications device sector.”

Siliconware had consolidated sales of NT$7.42 billion in May, up 8.76 percent from a month earlier and also up 24.15 percent from a year earlier. It was the second consecutive month in which the company reported a fresh high in sales.

Chang said he expected Siliconware to post earnings per share of about NT$4 in 2014 on the back of production expansion to meet rising demand, up from NT$1.90 in EPS in 2013.

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