December 19, 2018 / 9:57 AM / 6 months ago

UPDATE 1-Chip industry woes force Switzerland's VAT to extend short work hours

* Shares drop as shorter work hours extended

* VAT says market correction continues

* Analysts fear 2019 could get worse (Adds details, company comment, analyst comment)

By John Miller

ZURICH, Dec 19 (Reuters) - Weak demand from semiconductor customers forced Swiss vacuum valve maker VAT Group to keep 400 production employees on shorter working hours as it seeks to manage a prolonged market slump without shedding trained staff.

VAT shares fell 5.9 percent after Wednesday’s announcement, extending a decline this year to about 38 percent.

When the semiconductor industry boomed in 2017, the Swiss company’s shares rose more than 70 percent and were among the nation’s top stock market performers.

VAT, whose vacuum valves are critical components in chip factories, is seen as a bellwether for the industry. Its announcement in October that its Swiss workers would work shorter hours added to a correction among semiconductor stocks.

The company said on Wednesday the business slowdown was continuing, forcing it to keep down hours for employees at its facility in Haag, Switzerland for longer than expected. The latest cut in hours is planned until March 31.

“VAT is confronted with a market correction due to the significant capacity additions by the semiconductor companies during 2017 and the beginning of 2018 that need to be digested,” the company said in a statement.

It said semiconductor and display activities were suffering from delays in expansion plans at fabrication plants.

VAT, which also has production in Romania and Malaysia, said in 2017 it had boosted its market share of vacuum valves and related products for semiconductors and display manufacturing to 45 percent, a rise of 4 percent.

This year, the company reported lower-than-expected third quarter orders as it revised down its 2018 outlook.

“The announcement confirms our view that demand weakness for semiconductor equipment will stretch well into 2019 and that the market in 2019 will decline versus 2018,” Bank Vontobel analysts wrote in a note.

Semiconductor-related companies including Applied Materials and Lam Research, both VAT customers, are the biggest drags on tech earnings estimates for 2019.

Shares in Atlas Copco of Sweden, which sells vacuum pumps to semiconductor fabrication plants, were also down about 1.1 percent on Wednesday. (Reporting by John Miller Editing by Louise Heavens and Edmund Blair)

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