UMC anticipates a loss on weaker chip demand

United Microelectronics Corp (聯電), the second-largest contract chipmaker, said it expects to post an operating loss in the second quarter ending June 30 as global demand for semiconductors wanes.

Revenue in the second quarter will probably fall about 35 percent from first-quarter sales of NT$23.6 billion ($685.5 million), UMC said.

"The second quarter reflected the deteriorating economic environment as well as the harsh end-market inventory correction," Chief Executive Peter Chang (張崇德) said in a statement. "The lack of demand and continued inventory adjustment by our customers are impacting UMC's business as well as its future outlook."

About 55 percent of the company's production capacity will be idle in the second quarter, said the company, as global demand slumps for computer, communications and consumer electronics chips. UMC makes chips for companies such as Xilinx Inc and SanDisk Corp in the US and others in Europe and Japan.

In its quarterly institutional investor briefing held on April 30, UMC predicted that sales in the second quarter would fall 30 percent on the quarter, while its capacity utilization rate was seen at 50 percent at worst.

Investors said they were surprised by the news.

"The stock price has factored in a slowing second quarter, but the warning on the deteriorating third quarter will hurt the stock market on Monday," said Tracy Chen, who manages the NT$2.1 billion E-Tech Fund at Prudential Securities Investment Trust Co (保誠投信) in Taipei.