Passive component maker Yageo expects consolidated revenues to grow 1-5% sequentially in the first quarter of 2011, driven by brisk demand for smartphones, tablets, and LED-backlit TVs and lighting products, according to company chairman Pierre Chen. However, gross margin for the first quarter may be affected by exchange rate volatility and rising material costs, said Chen.

Yageo reported net profits of NT$782 million (US$26.6 million), or NT$0.36 a share, on consolidated revenues of NT$6.31 billion for the fourth quarter of 2010. Sales were up 16.1% on quarter, but profits slipped 36.8%. Gross margin for the fourth quarter slid 2.1pp sequentially to 26.6%.

Yageo incurred about NT$25 million in losses from currency exchange rates for the fourth quarter. The company said it may continue to suffer currency exchange losses in the current quarter. Meanwhile, rising silver palladium costs will also put pressure on its gross margin, the company added.

Chen noted it is still too early to negotiate new prices with customers. But whether or not Yageo should adjust its prices in the face of rising cost pressure will be more certain between the end of the first quarter and early second quarter, Chen said.

For all of 2010, Yageo's consolidated revenues increased 42.8% to NT$27.315 billion. The company expects to see modest sales growth in 2011.

In addition, Chen revealed that Yageo will expand its total capacity for MLCCs and chip resistors by 10-15% in 2011 in order to cater to customer demand. But the company has not yet finalized the size of its capex for the year, Chen said.