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KUALA LUMPUR: The one-week shutdown at Unisem (M) Bhd’s Ipoh plant due to a spike in Covid-19 cases could result in further delays in the production ramp-up for its key customer’s radio-frequency (RF) power amplifier and multi-chip module programme.
The global provider of semiconductor assembly and test services estimated the potential loss of production arising from the latest closure to be 2% of its total annual production volume, said CGS-CIMB Research.
Unisem expects production at the Ipoh plant will continue to be impacted in the coming months due to headcount limits until the Covid-19 pandemic subsides.
In its latest report, CGS-CIMB Research said it is cautiously optimistic that Unisem would be able to catch up with production in the fourth quarter as Covid-19 vaccination rates in Perak gradually increased.
Unisem had engaged a private healthcare service provider to carry out mass Covid-19 vaccination for its employees at its Ipoh plant from Sept 1-3.
CGS-CIMB Research said Unisem’s management had indicated that nearly 100% of eligible employees at the Ipoh plant have received their first dose of vaccination.
The group expects to complete the full vaccination of its employees by end-September 2021.
Unisem’s management had guided for 5% to 8% quarter-on-quarter (q-o-q) US dollar sales growth in the third quarter in spite of the initial 11-day plant closure.
However, CGS-CIMB Research opined that the second plant closure, coupled with headcount limits, could mean lower or even flattish q-o-q sales delivery in the third quarter.
“Nevertheless, stronger contribution from Unisem Chengdu could partially offset the near-term impact at Unisem Ipoh.
“We estimate revenue contribution from Unisem Chengdu to overtake Unisem Ipoh and account for 55% to 60% of the group’s 2021 revenue,” said the research house.
CGS-CIMB Research said it was hopeful that future plant shutdowns will be shortened as companies increase the frequency of screening and sanitisation processes to minimise production disruption.
The research unit reiterated its “add” call on Unisem’s stock with an unchanged RM10.50 target price.