Israeli chipmaker TowerJazz expects core business growth, shares rise

By Steven Scheer

JERUSALEM (Reuters) - Israeli chip manufacturer TowerJazz said it expects its main business units to grow further this year, despite macro-economic headwinds facing the sector, lifting its shares.

The specialist in analogue chips used in cars, medical sensors and power management on Tuesday forecast its first-quarter revenue in a range of 5 percent above or below $310 million, in line with expectations.

Semiconductor companies have produced poor results recently, with AMS this month stoking fears of a slowdown after sales warnings from Apple, Samsung and Taiwan Semiconductor last month pointed to stagnating smartphone demand and a cooling Chinese economy.

Similarly, German chipmaker Infineon Technologies cut its guidance for full-year revenue growth.

Although chief executive Russell Ellwanger declined to give a full-year forecast after TowerJazz reported 2018 revenue of $1.3 billion, down from $1.39 billion in 2017, he said its businesses were performing well with significant new contracts.

Mobile revenues, which slipped to 17 percent of revenue in 2018 from 21 percent, should be flat this year, he said.

Analysts forecast a slight fall in 2019 revenue to $1.28 billion.

"We see core business growth throughout the year," Ellwanger told Reuters. "Overall, every one of our core businesses is a very big, stable, growth market."

He cited a large deal for 300 mm, 65 nanometer chips for power management, another deal for radio frequency chips and said its "image sensor business has really been going well".

TowerJazz reported diluted earnings per share excluding one-time items of 41 cents in the fourth quarter, up from 37 cents a year before. Revenue fell to $333.6 million from $357.6 million.

Analysts had forecast adjusted EPS of 42 cents on revenue of $336.9 million, according to I/B/E/S data from Refinitiv.

Ellwanger said that the renegotiation of a new three-year contract with TPSCo, its joint venture with Panasonic Corp, in the second quarter would weigh on revenues, although that would likely be offset by core growth.

"On an organic basis we see ourselves growing nicely and that's a function of the wins we had in 2017 and 2018," he said.

Overall, the chip market has seen a pullback in the mobile sector which has not reversed so far in 2019, he said, while geopolitical concerns, partly due to U.S.-China trade tensions, had led to uncertainties in supply.

"There is more of a closer inventory control...Nobody wants to be caught holding inventory that could become stale and obsolete," Ellwanger added.

TowerJazz's shares were up 9 percent by 1516 GMT in New York. They are up 13 percent so far this year, lagging the Philadelphia SE Semiconductor index's 17 percent rise, after a 57 percent drop in 2018.

(Reporting by Steven Scheer; Editing by Tova Cohen, Kirsten Donovan and Alexander Smith)