Vanguard International Semiconductor Corp.

Overview Key strengths Key risks Sufficient financial buffer with net cash position should support the company's operation and expansion amid the current industry downturn. Smaller operating scale and less-diversified product and client portfolios compared with that of its global leading foundry peers. Good technology capability providing 8-inch foundry services with leading position in some products. Competition for mature technology nodes could be intense under normal business cycles. Strong client commitment will lower downside risk if market conditions weaken. Business volatility to arise from possible technology transitions to more advanced nodes over the long term. Vanguard International Semiconductor Corp.'s. low utilization in the first quarter of 2023 could recover in the next few quarters, because we expect global electronics inventory to

... utilization in the first quarter of 2023 could recover in the next few quarters, because we expect global electronics inventory to have peaked in the first quarter of this year for most product end markets, and in about the second quarter for component and semiconductor suppliers. It remains unclear how fast and effective Vanguard can restore its utilization once demand recovers, given the still highly uncertain global economic outlook and demand outlook for IT products. Nevertheless, we assume the utilization rate in 2023 to be 65%-70%, compared to about 60% in the first quarter of 2023, because the company's clients are likely to restock their depleted inventory even with weak end-market demand. In addition, Vanguard's strong client relationship management could support its operating performance during the current downturn. Moreover, the company's long-term contracts with its clients should offer some support to its shipments and selling...

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