Yageo Resumes OEM Service for Japanese Clients

Taipei, Feb. 20, 2009 (CENS)--To counter the global financial tsunami, Yageo Corp., a leading Taiwanese supplier of passive components, is going to adjust its operation strategy to resume OEM (original equipment manufacturing) services to vie for contract orders from Japanese clients, according to industry sources.

Affected by seasonal factors, Yageo posted sales revenue of only NT$984 million in January, down 10% from a month earlier or 50% from a year earlier. Nevertheless, the firm's sales performance will surely improve due to an influx of orders.

The sources indicated that after reshuffling the management early this year, Yageo, the largest supplier of resistors in the world presently, has set up two special teams, in a bid to boost its business operations by restarting OEM business. So far, the firm has actively contacted several large-sized Japanese clients for contract orders for resistors and capacitors. Plus, the firm is also likely to compete for orders for low-middle-end MLCC (multi-layer ceramic capacitor) in the country.

Because of a time-consuming process of product certifications, the OEM business is not expected to contribute significantly to Yageo's operations until the second half of this year, when the firm is expected to see its capacity utilization rate rise, industry insiders noted. However, they added, the firm's gross profit rates may decline mainly due to OEM business that is less profitable than existing OBM (original brand manufacturing).

Besides, noteworthy is that facing the industrial and global economical recessions, Japanese suppliers of passive components have moved to cut production capacities recently. In other words, contract orders from Japanese companies are quite limited. Furthermore, some even opine that the outsourcing is very complicated for some reasons, and hence have no plans to outsource passive components at the moment, according to industry insiders.