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Chipmaker TowerJazz, in the second quarter, profit falls less than expected, in order to have the capacity to expand

TEL AVIV (Reuters) – the Chip manufacturer TowerJazz posted a drop in second-quarter profit, as revenues declined as a result of a reduction in the price of a renewed contract, and it said that it would invest $100 million to expand production capacity at a plant in Japan to meet growing global demand.

A FILE PHOTO of the logo of The Israeli chipmaker TowerJazz is to be seen at their offices in Migdal HaEmek, northern Israel, September 13, 2017. REUTERS/Ronen Zvulun

The Israeli company, which specializes in analog chips, which are used in automobiles, medical sensors, and power management, it is placed on a Monday, the diluted earnings per share, excluding one-time items, of 24 cents in the quarter, down from 42 cents a year earlier. Sales slipped to $306 million, up from $335 million.

This beat forecasts for adjusted earnings per share of 22 cents on revenue of $ 303 million, according to I/B/E/S data from the Refinitiv.

TowerJazz said the new contract is for the supply of Panasonic Corporation of joint venture, decreased sales by $22 million in the quarter, due to a price change.

He expects the third quarter revenue in the range of 5% above or below the $312 million). Analysts were predicting $307 million in revenue.

TowerJazz’s shares have increased by 10.7%, to $20.28 in premarket trading on the Nasdaq stock exchange. They have gained 23% since the beginning of the year.

Due to the anticipated future needs of the customer is greater than the current capacity of its joint venture with Panasonic in Japan, TowerJazz said it will expand the capacity of the power and image sensors, platforms, and radio-frequency chips for mobile devices. It will be allocating approximately $ 100 million of this capacity is aimed to be installed in the first half, by the year 2020.

“We think 5G will be a good growth driver for us, and maybe it starts,” Chief Executive Russell Ellwanger told Reuters.

He also expects that the growth rate of automotive applications, including sensors, including lidar, for use in an autonomous vehicle, and a battery management system for electric vehicles.

“If you look at the downturn in the industry in Q1 and Q2, a lot of our segment, had to reguide due to the U. s.-China trade war and we’re still up,” Ellwanger said.

Reporting by Tova Cohen; editing by Emelia Sithole-Matarise

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