STATS ChipPAC acquires LSI’s Thai test, assembly plant for $100M

Singapore-based semiconductor test and advanced packaging services supplier STATS ChipPAC Ltd. has agreed to acquire an assembly and test operation in Pathumthani, Thailand from LSI Corp. for approximately $100 million.

Under terms of the agreement with LSI, STATS ChipPAC will acquire LSI’s operation which consists of a facility with approximately 440,000 square feet of floor space, manufacturing equipment and certain other assets.

STATS ChipPAC said it will offer employment contracts to employees in the Thailand facility. Further, LSI will enter into a long-term supply agreement with STATS ChipPAC for their assembly and test services needs.

Tan Lay Koon, president and CEO of STATS ChipPAC said in a statement, “The acquisition of LSI’s Thailand facility and its world class workforce secures long term business commitment from LSI to STATS ChipPAC and reinforces our position in the data storage and communications market.”

Also, he said this move adds scale and improves the economies of scale of the company’s leadframe business.

LSI’s Andy Micallef, executive VP of operations noted that this sale reinforces LSI’s transition to a fabless manufacturing business model and will allow the company to focus our resources on designing and marketing semiconductor solutions. “It also provides us with assured capacity and access to the same high quality assembly and test services that LSI requires going forward,” he added.

The transaction is expected to close within 90 days.

STATS ChipPAC also reported Wednesday weak financial results for its Q2.

Koon said, “Our second quarter was impacted by weak demand from certain large customers. As a result, our revenue declined about 5.2 percent from prior quarter. In general, we saw strong growth in our consumer and multi-applications market in applications like NAND flash, portable multimedia devices, digital TV and camera. Wireless communications were generally strong. Our personal computer business was weaker but improved towards the end of the second quarter on recovery of storage devices and graphics chipsets.”

Q2 revenue decreased 11.5 percent to $370.2 million, compared to $418.1 million in Q2 2006. This represents a sequential decline of 5.2 percent compared to Q1.

Net income for Q2 was $7.4 million or 4 cents per diluted ADS, compared to net income of $18 million or 9 cents per diluted ADS in Q2 2006. Net income for Q2 included approximately $2 million in share-based compensation expense as required under SFAS 123(R), $4.1 million in non-recurring expenses related to the tender offer from Singapore Technologies Semiconductors Pte Ltd, a wholly-owned subsidiary of Temasek Holdings (Private) Limited, $1.7 million in impairment on the company’s assets used to manufacture discrete power packages that are classified as held for sale and $1 million in restructuring expenses.

Tham Kah Locke, acting CFO of STATS ChipPAC said the company continues to focus capital spending on strategic customer programs and to emphasize the generation of cash flow from operations. In the second quarter of 2007, we spent approximately $55.4 million in capital expenditures, which was 15 percent of revenue compared to 26.9 percent of revenue in the second quarter of 2006. Gross margin in this quarter was 18.1 percent compared to 19.9 percent in prior quarter. The margin declined due to lower revenue.”

Looking ahead to Q3, Koon commented, “For the third quarter, we expect revenue to be approximately in the range of $389 to $408 million or in the range of 5 to 10 percent higher than the second quarter of 2007, with US GAAP net income in the range of $18 million to $24 million, which represents US GAAP net income per diluted ADS of 8 to 11 cents, including the impact of approximately 1 cents per diluted ADS for the expensing of share-based compensation.